Question: Why does money have a time value? This core principle of finance holds that, provided money can earn interest, any amount of money is worth

Why does money have a time value?

This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value.

The idea that money that is available is of greater value than the same amount of money in the future is based on its earning capacity. (compounding interest)

Can you provide at least one real-life scenario in which you can apply the concept of "time value of money"?

How much will $10,000 be worth in 10 years at 12% interest?

FV = PV *((1 + i) ^ n)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can...

can any expert help me with the below assignment just only 2 questions ,please read the requirment word by word and be careful about the style of the reference(APA) , file 3.1 is for question...

just only 2 questions ,please read the requirment word by word and be careful about the style of the reference(APA) , file 3.1 is for question 2..BTW,please focus the every step FINANCE SPOTLIGHT...

Answer all 11 multiple choice questions. Only give answers 1. jonathon has a lot of wealth. His assets include a $1.5 million dollar home, 500K in stocks, and artwork valued at $1 million. He also...

1-9 are true and false! Finance is the study of how individuals, institutions, and businesses acquire, spend and manage money and other financial resources. 2. Personal finance is the study of how...

How much will you pay for a $10,000 automobile in 20 years if the inflation rate averages 5% per year for 20 years? 10,000 26,532.98 20,000 17,589.14 Question 6 You have a $100 bill today. Inflation...

Time to accumulate a given sum Personal Finance Problem Manuel Rios wishes to determine how long it will take an initial deposit of $11,000 to double. a. If Manuel earns 12% annual interest on the...

Question 18 Hogan Company has $1,000,000 of bonds outstanding. The unamortized premium is $14,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption? $10,000...

Inflation, time value, and annual deposits Personal Finance Problem While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $203,000. The...

1 2 3 4 5 Accumulating a growing future sum Personal Finance Problem A retirement home at Deer Trail Estates now costs $147,000. Inflation is expected to cause this price to increase at 6% per year...

Assume Congress wishes to encourage healthy eating and is considering a deduction for broccoli purchases. In order to maximize the value of this tax deduction for taxpayers, Congress should provide...

You are the manager in the audit of Vernal Manufacturing Company and are turning your attention to the income statement accounts. The in-charge auditor assessed control risk for all cycles as low,...

Sale commissions must be disclosed to the customer in all of the follow circumstances itself

The force constant of a massless spring is 2 5 . 0 N / m . A mass of 0 . 4 5 kg is oscillating in simple harmonic motion at the end of the spring

Describe the basic concepts underlying variance analysis, and explain when variances should be investigated.

Compute overhead variances three different ways, and explain overhead accounting.

Explain the purpose of a standard cost sheet.