The concept of Time Value of Money

Show Me the MoneyThe concept of Time Value of Money (TVM) is that a clam in ones hand is more valuable than receiving that aforesaid(prenominal) buck in the future because of the potential earnings of the money in hand in ones possession when invested properly (University of Phoenix, 2007). TVM has factors that can assist in determine whether money should be held on, invested or spend. This paper will localize the factors that include prospect speak to, quest commit, compounding, present tax and future value, and their impact on TVM. This paper will too come up to how annuities and Rule 72 affect TVM problems and investment funds outcomes. stupor on Opportunity CostOpportunity cost is the cost of apt(p) something up or forfeited to get something else (Opportunity Cost, n.d.). A participation?s gross sales and gross margins are burning(prenominal) to its success but its cash decrease investments are besides important. TVM is evident in opportunity cost when a fe llowship evaluates future investments of its cash flow with a desired answer of increasing the value of its underway funds at the time the maturity or village of the investment. These cash flow investments moldiness be carefully analyze if an investment is worth the luck because a poor end may tie up an organization?s money or worse its cash flow may be put at risk. Impact of use up Rates and CompoundingInterest rate is the either cost or return state as a percentage of the borrowed or invested money per specified period, typically one course (Interest, n.d.).

?Compound invade is calculated all(prenominal) period on the true principal and all intere! st accumulated during past periods. Although the interest may be stated as a one-year rate, the compounding periods can be yearly, semiannually, quarterly, or even continuously.? (Interest, n.d, bring in the Compound Interest section, para 1). In easy ground, compound interest... You have outlined a lot of terms for plurality. However most people who read this will already know these terms. Those that read this for the start time will belike still not study your terminology. If you want to get a full essay, order it on our website: OrderCustomPaper.com

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