Resource: Ch. 12, 12-A, & 12-C of Health Care Finance

Part I: Complete the following table by inserting your responses to the questions. Cite any sources you use.

|Define the time value of money. |The time value of money is the value of money figuring in a given amount of interest earned over a given | | |amount of time. The time value of money is the central concept in finance theory. The value of a dollar today| | |is more than the value of a dollar in the future: thus the “present value” terminology. Furthermore, the | | |further in the future the receipt of your dollar occurs, the less it is worth. | |Provide a real-world example for the time |For example, $100 of today's money invested for one year in a stock in McDonalds can earn 5% interest will be| |value of money. |worth $105 after one year. Therefore, $100 paid now or $105 paid exactly one year from now both have the same| | |value to the recipient who assumes 5% interest; using time value of money terminology, $100 invested for one | | |year at 5% interest has a future value of $105. | |Why is time such an important factor in |Because money deposited or invested can earn more money over time, time can allow the value of money to | |financial matters? |increase. Time also has the effect of eroding the purchasing value of money through inflation. You can use | | |certain financial calculations, described later, to estimate what effect time might have on your money. | |How would you use the time...

...FINANCE
TIMEVALUE OF MONEY
The aim of this paper is to learn about time-value-of-money to make optimal decisions as manger must understand the relationship between a dollars present today and a dollar in the future.
Timevalue of money
Today’s financial managers often have to compare cash payments that occur on different dates. To make optimal decisions, the manager must understand the relationship between a dollar today [present value] and a dollar in the future [future value]. The timevalue of money is basically a measurement or perspective of an investment you might make while still considering its future decrease in value due to inflation. The timevalue of money allows us to understand what that inflation or decrease may become in the future or present. Most importantly, the timevalue of money concept allows us to decide whether it would be beneficial placing a sum of money into investment where it collects value from interest, or whether that same amount of money would be most valuable in the present due to inflation rates.
Understanding the concept of timevalue of money
It...

...TimeValue of Money
The timevalue of money (TVM) or, discounted present value, is one of the basic concepts of finance and was developed by Leonardo Fibonacci in 1202. The timevalue of money (TVM) is based on the premise that one will prefer to receive a certain amount of money today than the same amount in the future, all else equal. As a result, when one deposits money in a bank account, one demands (and earns) interest. Money received today is more valuable than money received in the future by the amount of interest we can earn with the money. If $90 today will accumulate to $100 a year from now, then the present value of $100 to be received one year from now is $90.
To fully understand timevalue of money one must first understand a few terms. Present value and future value are totally different. They also have their disadvantages and advantages; it just depends on how they are used. Of course, present value is what you have right now at this present time. While future value is the amount of money you will have at a given time in the future. Future value has a tendency to be deep;...

...TimeValue of Money (TVM), developed by Leonardo Fibonacci in 1202, is an important concept in financial management. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities.
TVM is based on the concept that a dollar today is worth more than a dollar in the future. That is mainly because money held today can be invested and earn interest.
A key concept of TVM is that a single sum of money or a series of equal, evenly-spaced payments or receipts promised in the future can be converted to an equivalent value today. Conversely, one can determine the value to which a single sum or a series of future payments will grow to at some future date.
The timevalue of money serves as the foundation for all other notions in finance. It impacts business finance, consumer finance and government finance. Timevalue of money results from the concept of interest.
Key Components of TimeValue of Money
Present Value is an amount today that is equivalent to a future payment, or series of payments, that has been discounted by an appropriate interest rate. The future amount can be a single sum that will be received at the end of the last period, as a...

...
TimeValue Of Money
Rawand Ibrahim
Florida State College At Jacksonville
Dr. Daniel J. Mashevsky
FIN4501-Investment Management
Table of Contents
Introduction 2
Components of interest rate 3
Stocks and Bonds 4
Interest rate 4
Future Value 5
Determining Present Value 6
Conclusion 6
Reference: 7
Introduction
What is the timevalue of money? (Campbell Harvey, 2012) “Timevalue of money is initially defined as the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. In other words, the idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received”. In this paper we will discover what it means when people refer to time being money by learning to calculate the value of the present dollar as well as the value of the future dollar. Later, with examples, we will continue to find out exactly why interest is the foundation of timevalue of money.
Components of interest rate
(Business Dictionary, 2015) “A capital market is a financial market that works as a passage for...

...Abstract
The first steps toward understanding the relationship between the value of dollars today and that of dollars in the future is by looking at how funds invested will grow over time. This understanding will allow one to answer such questions as; how much should be invested today to produce a specified future sum of money?
TimeValue of Money
In most cases, borrowing money is not free, unless it is a fiver for lunch from a friend. Interest is the cost of borrowing money. An interest rate is the cost stated as a percent of the amount borrowed per a period of time, usually one year. The current market rates are composed of three items.
The Real Rate of Interest is what compensates lenders for postponing their own spending during the term of the loan. An Inflation Premium is added to offset the possibility that inflation may eat into the value of the money during the term of the loan. In addition, various Risk Premiums are added to compensate the lender for risky loans such as unsecured loans made to borrowers with questionable credit ratings or loans that the lender may not be able to easily resell.
The first two components of the interest rate listed above, the real rate of interest and an inflation premium, together are referred to as the nominal risk-free rate. In the United States, the nominal risk-free...

...Abstract
In this paper, Team C will discuss the concept of the timevalue of money and the importance of this concept in business. Also, we will provide a demonstration of the use of the formula used to calculate the present and future values of money to get the present value of $100 using different periods of time and interest rates.
TimeValue ofMoney
In the world of business, it is essential to know what TVM represents and how it helps make better choices in how we spend our money. TVM is also known as TimeValue of money which is a given amount of interest earned in a period of time (Wikipedia, 2011). Each member in group “C” will use 100 as our present value and we will choose an interest rate and period. Timevalue of money concept is used to determine present and future values of money. “The timevalue of money refers to the relationship between time, money, and the rate of interest.” (Letsche, 2011). The formula consist of four components FV = Future Value, PV = Present Value, i = the interestrate per period and n= the number of compounding periods (TeachMeFinance.com)....

...In financial management, one of the most important concepts is the TimeValue of Money (TVM). TimeValue of Money concepts helps a manager or investors understand the benefits and the future cash flow to help justify the initial cost of the project or investment. Many of the assets businesses and individuals own are financed with money borrowed from others, so the understanding of TVM is crucial to making good buying decisions. To recognize how annuities affect the timevalue of money, managers need to consider the factors of interest rate, opportunity costs, future and present values of money, and compounding.
Interest Rates and CompoundingIn most business cases, borrowing money is not necessarily a free enterprise. It costs companies money to obtain funds on credit to finance various aspects of their business. The fee that a borrower pays to a lender for use of its money is interest. The annual percentage rate (APR) makes assumptions based on simple interest, which is interest only earned on the principal investment.
Another method of accruing interest is through compounding. Compound interest is not only charged on the original investment, but also assessed on the interest charged or earned for each period. "When comparing interest rates, it is best to use...

...and Future Price of Money
Trident University International
FIN 501
Module 2: Case Assignment
Dr. John Halstead
One of the most important concepts about saving and investing is the timevalue of money. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities. This means money paid out or received in the future is not equivalent to money paid out or received today because inflation erodes money’s buying power. Basically, the power of time is on a person’s side and the premise that cash in hand today is more valuable than the same amount in the future due to its capability of earning interest. There are three factors affecting how much an investment will grow: time, money, and interest rate. TimeValue of Money is a concept that is very important in financial management. It affects business, personal, and government finance (Harvey, 2012) Within this paper we will discuss the definition of TimeValue of Money and identifies the importance of financial managers understanding the concept.
Time, Money and Interest Rates
Time has an important impact on the future value of money....

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