Daffodil International University
Faculties and Departments => Business & Entrepreneurship => Topic started by: hassan on April 24, 2017, 08:59:30 PM
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The time value of money describes the greater benefit of receiving money now rather than later. It is founded on time preference.
The principle of the time value of money explains why interest is paid or earned: Interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the time value of money.
It also underlies investment. Investors are willing to forgo spending their money now if they expect a favorable return on their investment in the future.
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The concept that holds that a specific sum of money is more valuable the sooner it is received. Time value of money is dependent not only on the time interval being considered but also the rate of discount used in calculating current or future values.