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 alike buck in the future because of the potential earnings of the currency 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 forget localize the factors that include prospect approach, quest commit, compounding, present rank and future value, and their impact on TVM. This paper will withal come up to how annuities and Rule 72 affect TVM problems and enthronization outcomes. partake on Opportunity CostOpportunity cost is the cost of given(p) something up or forfeited to get something else (Opportunity Cost, n.d.). A smart set?s gross sales and gross margins are grievous to its success but its immediate payment decrease investments are similarly important. TVM is evident in opportunity cost when a company evalua tes future investments of its cash flow with a desired forget of increasing the value of its underway funds at the metre the maturity or village of the investment. These cash flow investments essential be carefully analyze if an investment is worth the assay 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 share of the borrowed or invested money per specified period, typically one category (Interest, n.d.).

?Compound pursual is calculated all(prenominal) period on the cowcatcher principal and all interest accu! mulated during past periods. Although the interest may be stated as a annual rate, the compounding periods can be yearly, semiannually, quarterly, or even continuously.? (Interest, n.d, appoint in the Compound Interest section, para 1). In candid cost, 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 credibly still not study your terminology. If you want to get a full essay, order it on our website: OrderCustomPaper.com

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