Why money has a time value.

Full Answer Section Here is an example of how TVM can impact your life: Let's say you have the opportunity to invest $100 today at an interest rate of 5%. In one year, your investment will be worth $105. This is because you will have earned $5 in interest on your investment. If you wait two years to invest the $100, your investment will only be worth $110. This is because you will have earned $5 in interest in the first year, and then $5 in interest on the $105 in interest that you earned in the first year. As you can see, the longer you wait to invest, the less money you will have in the future. This is because you will have missed out on the opportunity to earn interest on your investment. Here is another example from my own experience: When I was in college, I had the opportunity to take out a student loan to pay for my tuition. However, I decided to take out a smaller loan and work part-time to pay for the rest of my tuition. This was a wise decision, because I was able to pay off my student loan much sooner. I also saved money on interest, because I had the money to invest instead of paying interest on a loan. If I had taken out a larger student loan, I would have had to pay more interest over the life of the loan. This would have made it more difficult for me to save for a down payment on a house or to pay for other expenses in the future. The time value of money is an important concept to understand, as it can have a significant impact on your financial future. By understanding TVM, you can make better financial decisions that will help you reach your goals.

Sample Answer Money has a time value because it can be invested to earn a return. This means that money today is worth more than money in the future, because it can be used to earn interest or dividends. The time value of money (TVM) can impact your life in a number of ways. For example, if you have the opportunity to invest money today, you will have more money in the future. This can help you save for retirement, pay for a child's education, or purchase a home.