Factors that Affect the Time Value of Money
Time value of money is the concept that an amount of money in one's possession is worth more than that same amount of money promised in the future (Garrison, 2006). The reason for this is that money today can be invested to earn interest and therefore will be worth more in the future (Brealey, Myers, & Marcus, 2004). This paper will explain how annuities affect time value of money (TVM) problems and investment outcomes. In addition, this paper will briefly address the impact of interest rates, present value, future value, opportunity cost and the rule of 72 on the time value of money.
Annuities
An annuity is an evenly spaced number of payments or money received in the same amount (Cedar Spring Software, Inc., 2002). Each TVM problem has five variables: interest rate or return, time or number of periods, future value, present value, and amount of payments either made or received (Brealey, Myers, & Marcus, 2004). The present value of......
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Approximate Word Count: 1046
Approximate Pages: 5 (260 words per double-spaced page) |