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What happens then to the TVM Model if a person who takes out a 5-year car loan is really planning on paying the loan off in 3 years?
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Explanation & Answer
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 earn interest, any amount of money is worth more the sooner it is received.
the 5-year car loan is worth more when received in 3 years
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