Describes the concept of time value of money, Financial Management

Assignment Help:

Q. Describes the Concept of Time value of Money?

'Time value of money' signifies that the value of a unit of money is different in different time periods. The worth of a sum of money received today is more than its value received after some time. On the contrary the sum of money received in future is less precious than it is today. Alternatively the present worth of a rupee received after some time will be less than a rupee received today. The time value of money can as well be referred to as time preference for money.

Three reasons perhaps attributed to the individual's time preference for money.

  • Risk
  • Preference for consumption
  • Investment opportunities

We live under risk or else uncertainty. As an individual isn't certain about future cash receipts he or she prefers receiving cash now. Most people have slanted preference consumption over future consumption of goods and service either for the reason that of the urgency of their present wants or because of the risk isn't being in a position to enjoy future consumption that perhaps caused by illness or death Or because of inflation.


Related Discussions:- Describes the concept of time value of money

Show limitations of profit maximization, Q. Show Limitations of Profit maxi...

Q. Show Limitations of Profit maximization? The Profit maximization criterion is criticized on the following grounds: i) Quality of Benefits: Profit maximization approach ig

Explain the term stakeholders, Explain the term StakeHolders The range ...

Explain the term StakeHolders The range of stakeholders may comprise directors/managers, lenders, shareholders, employees suppliers and customers. These groups are probable to

What is the floating rate bonds, What is the Floating Rate Bonds (FRBs) ...

What is the Floating Rate Bonds (FRBs) Bonds whose interest payments fluctuate with changes in general level of interest rates and are tied to a basic rate (termed as the refer

Explain interest rate risk, Explain Interest rate risk Interest rate r...

Explain Interest rate risk Interest rate risk considers to interest rates changing not favorably before the swap dealer can lay off with an opposing counterparty the unplaced

Calculate, #questiBabar Corporation''s present capital structure, which is ...

#questiBabar Corporation''s present capital structure, which is also its target capital structure I, is 40% debt and 60% common equity. Next year''s net income is projected to be R

Call provisions, The issuer's right to call back the issue before the...

The issuer's right to call back the issue before the maturity date is referred to as a "call provision". In case of asset-backed securities, the trustee is grante

When are the financial crises occurred, When are the financial crises occur...

When are the financial crises occurred? Financial crises arise where there is a large raise in asymmetric information into financial markets. Asymmetric information arises whil

Benefit and drawback of maintaining many manufacturing sites, Discuss the b...

Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer:  To set up multiple manufacturing sites can

What is the primary assumption behind experience approach, What is the prim...

What is the primary assumption behind the experience approach to forecasting? The experience act to forecasting is based on the assumption that things will happen a certain way

Beta, Definition of 'Beta' A measure of the volatility or systematic ri...

Definition of 'Beta' A measure of the volatility or systematic risk of a security or a portfolio in difference to the market as a whole. Beta is needed in the capital asset pri

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd