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FIN 419 week 2 discussion question 2

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Time Value of Money
Time value of money is core theory of financial management that deals with calculations
of the returns on investments and interest rates. The theory of time value of money states that the
value of a particular amount of money a person has in the bank at the present time is always
more than the expected value of same amount of money in the future [Lisa Maglof (2015)].
This theory directly relates to banking concepts such as interest rates, leasing procedures,
dividend payments, and investment plans. This theory provides people a basic systematic
platform to calculate the value of current payments in the future. It can be used to calculate risk
involved in an investment. Financial experts and investors use defined formula, risk free rate of
return, to calculate the expected variable value of money in the future to evaluate the feasibility
of an investment. The Time value of money formulas also help to calculate the amount of money
that one should deposit in a bank now to get, say, $20,000 in 6 years if interest rate is 4 percent
[Lisa Maglof (2015)].

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Time Value of Money Time value of money is core theory of financial management that deals with calculations of the returns on investments and interest rates. The theory of time value of money states that the value of a particular amount of money a person has in the bank at the present time is always more than the expected value of same amount of money in the future [Lisa Maglof (2015)]. This theory directly relates to banking concepts such as interest rates, leasing procedures, dividend payments, and investment plans. This theory provides people a basic systematic platform to calculate the v ...
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