The Time Value of Money is important in finance because one would want to know what the value of a dollar today would be worth in let's say 2 years. The Time Value of Money can be explained as the idea that money available at the present time is worth more than the same amount in the future, due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner the money is received. (Investopedia, 2009)A dollar today is worth more than a dollar tomorrow (Albrecht, Stince, Stince, & Swain,2007). This is one of the most basic financial principles. This particular principle is also in direct correlation to present value which can be defined as value today of a future cash flow (Albrecht, Stince, Stince, & Swain,2007). Obviously, there are numerous benefits relating to investing money in accounts that pay interest.
Wieser coined the terms marginal utility and oppor...
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Value for MoneyEarning money on money eared is just one of the many benefits and relates to the future value of one's money. Future value is the amount to which an investment will grow after earning interest.
When selecting accounts to invest in, it is important that one is knowledgeable of the various accounts and know how your money can work for you. Would one prefer an account earning simple interest or compound interest? I would argue that an account earning compound interest will provide a better reward. While a simple interest earning account will only pay interest on the original investment, a compound interest earning account will provide interest earned on interest. (Albrecht, Stince, Stince, & Swain,2007) Aside from knowing what type of interest earning account to invest in another important factor to a potential investor is how quickly can one's investment be...