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The Time Value of Money in Investments

The topic of money is always relevant in all branches of the modern economy since we all face money every day. Money for many people is the primary value measure and is the universal equivalent. The time value of money has a strong influence on the methods of evaluating the effectiveness of investment projects. This is because investment projects have a long life span, during which the cash flow is formed.

Time is one of the most critical factors in financial transactions and transactions. Thus, the time value of money can be defined as the dependence of its value on a specific point in time when it will be received. To calculate the future amount of money, it is best to use the discounting technique (Shrotriya, 2019). When performing financial calculations, it is necessary to calculate the monetary amounts in operations related to the provision of loans. This is done to determine the number of interest payments, the amount of debt, the calculation of monetary amounts related to debt obligations, monetary amounts taking into account taxes and inflation, and the parameters of operations related to the investment of foreign currency. Over time, the cost or value of money becomes different.

Everyone, especially those who are engaged in investments, in one way or another, depends on the time value of money. Most people choose to have money at that particular moment in time rather than having that particular amount of money later because, under similar conditions, it is more logical as the value of the sum will change. If people suddenly do not need the money, then in five years, they will still have it. Consequently, the time value of money will change, and, for example, five hundred dollars may have much lesser value.

References

Akhtar, S., Akhtar, F., Jahromi, M., & John, K. (2017). Impact of interest rate surprises on Islamic and conventional stocks and bonds. Journal of International Money and Finance, 79, 218-231.

Ross, S. A., Westerfield, R., & Jordan, B.(2018). Fundamentals of Corporate Finance. McGraw-Hill Education.

Shrotriya, V. (2019). Time value of the money-the concept and its utility. IJRAR, 6(1), 85-92.

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Essay4Business. "The Time Value of Money in Investments." January 14, 2023. https://essay4business.com/the-time-value-of-money-in-investments/.

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Essay4Business. 2023. "The Time Value of Money in Investments." January 14, 2023. https://essay4business.com/the-time-value-of-money-in-investments/.

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Essay4Business. (2023) 'The Time Value of Money in Investments'. 14 January.

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