Avail Online Time Value of Money Homework Help
A basic theory in financial management is that of the time value of money. According to this theory, the value of the money you have presently is greater than a dependable promise of receiving the same amount of money at a certain date in future. It is a very simple concept; however, it also underpins the concept of interest rate. When you work on your time value of money homework answers, you will come to learn that it can be used for comparing investments.
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Defining time value of money
The theory of time value of money states that the money that you have in bank in present has more worth than an expectation or promise of receiving the same amount in future. Understanding this simple theory can help you a lot with your time value of money homework answers because it is the base of everything within this topic. You can invest the money you have today, and earn a return on that investment through dividend or interest payments.
Uses of time value of money
Calculating the time value of money allows finding of the value of future payments and comparing them. There are five factors involved in this calculation: interest rate, number of times dividends or interest payments are made or number of periods, present value, future value and payments. Such calculation can help you find out how much you need to invest in present time to get a certain amount of money over a certain time period, depending on the interest rate.
The future value of an investment indicates how much its present value would grow by a certain date in future. The difference between present and future value is dependent on the interest rate or number of compounding periods involved in an investment. Time value of money assignment answers often requires you to calculate the future value of an investment.
Certain and uncertain payments
After a specific period, pay-outs are not guaranteed for all kinds of investment. In case the future payment is uncertain, its value has to be adjusted depending on the risk involved along with the time value.
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