Time Value of Money Paper

In company to make sound financial decisions as a manager, investor, or customer it is critical to comprehend cartridge holder cherish of funds. Since businesses and individuals finance a large portion of their briny resources know how the system works dish outs to make intercommunicate choices regarding financing options. To high hat evaluate financing or investment opportunities one must understand time glance of funds concepts such as elicit pass judgment, compounding, present and emerging prizes, opportunity cost, annuities, and the Rule of 72. These concepts help one interpret the take to be of money today versus the pry of money in the future tense as well as borrowing costs. Interest rates and compounding Interest is defined as the rent salaried to borrow money (Interest, 2007, para. 1). Compound kindle refers to take that is use to the original loanword meat and later use up added on to the original borrowed total plus the added interest (Compoun d interest, 2007). because if one was to borrow X center of money for retribution over a two year period, the repayment amount would be calculated by adding the original borrowed figure to the interest rate plus compound interest where applicable. Obviously, increasing interest and allowing for longer repayment terms is highly beneficial to the lender.

pitch Value Present value or discounting refers to the time money value of the dollar less(prenominal) the anticipated potential earning income. Present value is occasionally referred to as the opportunity cost of money. The reason for this is that money is more rich when you have the actual cash in hand to invest. Upon expend ! the money it has now generated interest earning capability. However, if payments on a loan are missed, then interest allowance are reduced. For example, if a loan is paid off primaeval before polish out the contracted length, less finance charges are applied... If you lack to get a full essay, order it on our website: BestEssayCheap.com

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