Asked by: Magi Meierl
asked in category: General Last Updated: 18th March, 2020

Why does money have a time value quizlet?

Money has a time value because funds received today can be invested to reach a greater value in the future. Because inflation tends to erode the purchasing power of money, funds received today will be worth more than the same amount received in the future.

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In this regard, why does money have a time value?

Definition: The time value of money is a financial concept that basically says money at hand today is worth more than the same amount of money in the future. This is due to the potential the current money has to earn more money. This is due to the potential the current money has to earn more money.

One may also ask, what is the time value of money and why is it so important? The time value of money (TVM) is an important concept to investors because a dollar on hand today is worth more than a dollar promised in the future. The dollar on hand today can be used to invest and earn interest or capital gains.

Furthermore, what is the time value of money quizlet?

Time value of money means that a dollar today is worth more than a dollar in the future. The current dollar value of a future amount—the amount of money that would have to be invested today at a given interest rate over a specified period to equal the future amount.

Which of the following examples is the application of the time value of money?

Time Value of Money Examples. Now, let's look at time value of money examples. If you invest $100 (the present value) for 1 year at a 5% interest rate (the discount rate), then at the end of the year, you would have $105 (the future value). So, according to this example, $100 today is worth $105 a year from today.

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