The Time Value of Money

Paper Summary:

This paper discusses how the value of money is different from one time to another, varying based on numerous economical components and events. According to the paper, aside from the purchasing power, the value of money also refers to the investment and profit opportunities granted by the sum of money an individual possesses.

Outline:
Executive Summary
Key components of TVM
Financial Implications of TVM

From the Paper:

"The present value of money represents the current amount of money possessed by an individual, whereas the future value of money represents the potential gains due to an investment of the current financial resources. In the specialized literature, in an attempt to better explain the concepts of present value of money and future time of money, numerous economists have given the following example: I give you 100 dollars. You take it to the bank. They will give you 10% interest rate per year for two years. The present value is that of 100 dollars, whereas the future value is increased 121 dollars, the initial money plus the 21 dollars interest rate from the bank. "

Sample of Sources Used:

• Wikipedia, The Free Online Encyclopedia, Time Value of Money, December 3, 2006http://en.wikipedia.org/wiki/Time_value_of_money, last accessed on December 9, 2006
• Gallager, T; Andrew, Jr. J., Financial Management: Principals and Practices, Upper Saddle River, NJ: Prentice Hall, 1996http://www.getobjects.com/Components/Finance/TVM/concepts.html, last accessed on December 9, 2006
• Kieso, D; Weygandt, Jerry, Intermediate Accounting, 9th Ed., New York, NY:John Wiley & Sons, Inc., 1993, http://www.getobjects.com/Components/Finance/TVM/concepts.html, last accessed on December 9, 2006
• McCracken, Mark, The time value of money, 16 July 2005, http://www.teachmefinance.com/timevalueofmoney.html, last accessed on December 9, 2006

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