Money
Time Value of Money
The first step in understanding the relationship between the value of the money today and the value of money in the future is one must look at how money is invested. One must also monitor how the money will grow over a time based on the investment made. The conclusion based on the investment made will allow one to answer the following question. How much should be invested today to produce a specified future sum of money in the future?
The time value of money (TVM) is the process when money is calculated in the present or future (wikipedia). TVM is based on the assertion that one will prefer to receive a certain amount of money today than the same amount in the future. As a result, when one deposits money in a bank account, one earns interest. Today's earned money has more value than the money that one would earn in the future because of the interest that can build up over time. For example, if $90 today will accumulate to $100 a year from now, then the......
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