Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Why does money have a time value? This core principle of finance holds that, provided money can earn interest, any amount of money is worth

Why does money have a time value?

This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value.

The idea that money that is available is of greater value than the same amount of money in the future is based on its earning capacity. (compounding interest)

Can you provide at least one real-life scenario in which you can apply the concept of "time value of money"?

How much will $10,000 be worth in 10 years at 12% interest?

FV = PV *((1 + i) ^ n)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurial Finance

Authors: J. Chris Leach, Ronald W. Melicher

6th edition

1305968352, 978-1337635653, 978-1305968356

More Books

Students also viewed these Finance questions

Question

Explain the purpose of a standard cost sheet.

Answered: 1 week ago