The meaning of time value of money

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jzyd123

Economics

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answer the discuss questions.

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ܕ 1) What do we mean by “Time Value of Money"?, 2) What is compound interest? How is compound interest related to Time Value of Money (TVM)? . 3) What 2 factors most affect how much people need to save to achieve their financial goals? - 4) Why might an investor require a greater expected return for an investment of longer maturity? . 5) Why is the interest rate in a Time Value of Money (TVM) calculation sometimes referred to as the discount rate? - 6) Why might you use the anticipated rate of inflation as the discount rate when calculating Present Value?, Discussions - • There will be multiple graded discussions. I will post the required reading(s) at the beginning of the week together with a set of questions. After you get accustomed with the material for that week and read the assigned article, you will start posting answers to the questions in the discussion forum. You can also add to a previous answer. Sound participation typically consists of focused comments or questions that enrich the learning experience of the class. Frequent contributions that add little to the learning of the class or demonstrate a lack of familiarity with class materials will be viewed unfavorably. -
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Running head: FINANCIAL MANAGEMENT

Financial Management
Student’s Name
Institutional Affiliation
Date

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FINANCIAL MANAGEMENT

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The meaning of time value of money
The meaning of the time value of money (TVM) is an idea which shows that money that is in
hand in the current time is worth more than a similar amount of money in the future as a result of
its capacity of earning. Thus such primary principle of finance shows that given that money
might earn interest; any sum of money is significantly more the sooner is received.
The meaning of compound interest
The issue of compound interest is the additional interest to the sum of the principal of a certain
loan as well as a deposit of money or its interest on interest. This interest is, therefore, the
outcome of interest reinvestment. Rather than paying interest out immediately as it matured,
reinvesting interest in a subsequent period will as well earn on the principal amount of money
plus earlier interes...


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