Discuss the concept of time value of money (TVM) and why it is important in finance? Explain with examples of how TVM is used and discuss important TVM concepts such as compounding, discounting, annuities, etc. Remenber to cite and reference page
Requirements: 300 words
Answer preview
In annuities, TVM is essential in understanding the present value of an annuity. This is useful when one has the option to receive payments in installments. In this regard, one must calculate the future value in order not to incur losses due to time factors. On investment, TVM helps in determining investments with higher returns as some are considerably time-bound, such as stocks, as compared to others, like real estate (Busu, 2022). In conclusion, one cannot enjoy the same value of money today as compared to receiving the same value in the future.
