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Running head: FINANCIAL MANAGEMENT
Financial Management
Student’s Name
Institutional Affiliation
Date
1
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...