Student’s Name Professor’s Name Class Name Date The concept of time value money which is commonly abbreviated as TVM argues that the future value of money will be less than the current or past value of the same money. This argument is supported by the potential capacity of the power of earning of money. Money is characterized by its ability to earn interest thus any amount of money received now weighs higher than the same amount received tomorrow (Hawawini and Viallet 317) Time value of money can also be termed as the PDVM – Present Discounted Value of Money. By taking 5 years ago whose current price is approximated to be $300 000 then I would have known how much to save given that my saving account is entitled to 10% interest per annum. $300 000 = PV(1.1^5) $186 276.40 It is also easy to compute this on a monthly basis $300 000 = PV(1.1)^(5*12) $985.28 Works Cited Hawawini Gabriel A and Claude Viallet. Finance for Executives: Managing for Value Creation. South-Western/Thomson Learning 2015. Larrabee David T and Jason A. Voss. Valuation Techniques: Discounted Cash Flow Earnings Quality Measures of Value Added and Real Options. John Wiley & Sons Inc 2017. [...]
Consider your friend or family member has asked you about your finance class, and wants to know - why you have to learn this - you decide to explain the concept of Time Value of Money, and use a REAL WORLD EXAMPLE to explain further. (Saving for retirement, saving for a car down payment, saving for school) which describes this example you are going to show your friend how this can help them in their financial decision, include calculations and details as to how you would illustrate this example.