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Unit 5 Discussion

Unit 5 Discussion

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Unit 5 Discussion

[Name of the Writer]

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Unit 5 Discussion

Advanced Time Value of Money

An advertised monthly lending rate of 0.9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. Discuss how you may have used TVM in a recent investment or loan decision and explain some of the TVM details that may have been involved in your transaction.

If you have not used TVM in the past financial transactions what practical TVM application would you expect to encounter in your future.

Time value of Money is the utmost fundamental and essential component in all of the business and finance. The concept of the Time value of Money is that the amount of money which is available at hand in the present (current) time is worth more than the similar volume of money in the coming future time (TVM-Time value of Money, 2019). This is because of its potential capacity or capability of earning.

The concept or code of Time Value of Money (TVM) states that the money could earn an extra amount of interest in future so the amount would be more worth than the amount at hand presently. As well as the value of the money would be greater in the future compared to the present value because of its investment which generates more amount of money (Lokken, 1996).

Time Value of Money being utilized currently is 401,000. I have the choice to deposit some amount of the money into an account which would be increased over some time. it would let me know that this is lonely making more amount of money. So if I decide to invest 15 US dollars now it is expected that this amount would be 25 US dollars after one year. This shows that my $15 amount would be increased to $25 and that alone is 10 dollars increase in the amount which is because of no investment of more money, effort or time.

This concept or idea me to make the investment of minimum amount and be able to get more amount of money on top of mine without any need to personally invest.

References

Lokken, L. (1996). The Time Value of Money Rules. Tax L. Rev., 42, 1.

Time Value of Money (TVM). (2019). Xplaind.com. Retrieved 3 July 2019, from https://xplaind.com/325604/time-value-of-money

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