What Is Time Value of Money - 923 Words

What is time value of money? The simple answer towards this question is that the same amount of money will have different value at different time. By this definition money is separated into its nominal value, which is the face amount, and the real value, which is the purchasing power of the money. The real reason here is that inflation exists, therefore when the price of a good goes up the same amount of money that was previously require to buy that good will not be able to buy that same good after the price increase. â€Å"Time value of money is the principle that the purchasing power of money can change over time† (Crosson S.V. 2008) Let’s take Bob, a student at Xiamen University as an example, every day when Bob wakes up he will walk out of his dorm room and go on the street to buy a piece of bread as his breakfast. At the start of the semester the bread is worth $3. He calculates that for the whole semester of three months he will need $276 to cover his breakfast co sts, therefore he rings up his mom and ask her to transfer that amount at the start of the semester. However, draught happen during that semester resulting in a price inflation of the piece of bread, if Bob chooses to have the same amount of bread he will be needing an amount increase equal to the rest of the days for this semester times the $1 price change of the bread. The simple fact that the same 276$ which is worth 92 pieces of bread at the start of the semester can now only buy 69 pieces of bread is theShow MoreRelatedTime Value of Money and Bond Valuation631 Words   |  3 PagesExamine the concept of time value of money in relation to corporate managers. Propose two (2) methods in which time value of money can help corporate managers in general. The  time valuation of money is the idea that  money available now could be worth more than the same amount in the future, because that current money has the possibility of earning money in the future. Think if the expression, â€Å"It takes money to make money!† If you are guaranteed to have $100.00 now or $100.00 in 3 years, you wouldRead MoreThe Time Value of Money875 Words   |  4 Pagesdiscuss the time value of money, and illustrate that I understand the concept. First, there will be an explanation of the key concepts of time value of money, including why it is important to know what these concepts are and how they are applied to the real world. The report will also contain several calculations made using present and future value tables. The calculations illustrate that not only do I understand the concepts but that I can apply them to mathematical computations. 1. The time valueRead MoreA Society Of Constant Consumption Of Materialistic Objects1617 Words   |  7 PagesMoney is underrated. This statement could come off to be absurd, in a society of constant consumption of materialistic objects. In an era where a person hardly has to be considered to belong to the upper class to drive a nice car or truck, pamper oneself with weekly pedicures or getting your hair blown out weekly because one does not want to did their selves, go out to eat on a frequent basis, have a housekeeper clean the house, or having someone do the yard work. This was all once reserved for onlyRead More Time is Money Essay1667 Words   |  7 PagesTime is Money How do we get this adage of â€Å"time is money?† Some say that it came about in 1748 when Benjamin Franklin actually coined the term, â€Å"Time is money† when giving advice to a young tradesman (Pausch). Why did this concept of time being worth money come in to our culture? Time evolved into being worth money because it cost money to allocate time to activities other than work. Either you work and get paid or you partake in another activity and forgo your distribution of capital. Read MoreEssay on Time Value Of Money1252 Words   |  6 PagesTime Value of Money The time value of money serves as the foundation of finance. The fact that a dollar today is worth more than a dollar in the future is the basis for investments and business growth. The future value of a dollar is based on the present dollar amount, interest rate and time period involved. Financial calculators and tables can assist in computing the future and present values, which eases the pain of the mathematically challenged. Yield or rate of return can also be calculatedRead MoreEssay about Eco 372 Week 4 Quiz1307 Words   |  6 Pageshis needs. 4. Changes in the quantity of money affect D a. interest rates b. prices c. production d. All of the above are correct 5. Which list ranks assets from most to least liquid? B a. currency, fine art, stocks b. currency, stocks, fine art c. fine art, currency, stocks d. fine art, stocks, currency 6. Fiat money A a. has no intrinsic value. b. is backed by gold. c. has intrinsic value equal to its value in exchange. d. is any close substitute for currencyRead MoreWhat Is Money? How Is It Created?1171 Words   |  5 PagesWHAT IS MONEY? HOW IS IT CREATED? Orthodox and Heterodox economics both examine what money is. However, their views are different and, historically, many controversies have existed around money; especially after the global financial crisis. Orthodox economists view money as a medium of exchange that replaced barter. They also view money as a store value; a derivative from the medium of exchange. Heterodox economics support that money is a social unit of account, where credits and debts are measuredRead MoreHow Money Is Still Relevant For Scientific Analysis1524 Words   |  7 PagesAs a result of money being developed as a practical means to exchange goods, the question of what is money is still relevant for scientific analysis. What is it really? Is it a social construct that has no intrinsic meaning? Is a dollar bill money? Is it a representation for value, or it is valuable intrinsically? Who decides the worth? What do we mean when we speak of money? The answers to these questions are not fully understood in our analysis of the current literature. Our goal is to exploreRead MoreDefinition of Money and Its Uses1579 Words   |  6 Pagesï » ¿An Analysis of Money and How it Works For a definition of money and where it comes from, one could turn to the United States Constitution, Article 1, Section 8, which states that the Congress shall have the Power to coin Money, regulate the Value thereof, and fix the standards of weights and measures. But if such a definition fails to get to the heart of what money is, one could turn to Adam Smith, author of Wealth of Nations, who wrote that money has become in all civilized nations the universalRead MoreThe Relationship Between Time And Money1545 Words   |  7 Pagesbetween time and money provides the foundation of every financial decision that we, the people made in the world today. Whether it will be saving money for a future event or considering a loan to pay for a current financial need. Everyday, everywhere people are greatly affected by the time value of money. Firms and organizations, investors and capitalists use this concept in particular for them to decide what to accomplish with their money and how to achie ve their goals. They give money today in