HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money

HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money. Time value of money is the concept that the value of a dollar to be received in future is less than the value of a dollar on hand today. One reason is that money received today can be invested thus generating more money. Another reason is that when a person opts to receive a sum of money in future rather than today, he is effectively lending the money and there are risks involved in lending such as default risk and inflation. 

HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money

HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money

HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money

HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money

Default risk arises when the borrower does not pay the money back to the lender. Inflation is the rise in general level of prices. Time value of money principle also applies when comparing the worth of money to be received in future and the worth of money to be received in further future. In other words, TVM principle says that the value of given sum of money to be received on a particular date is more than the same sum of money to be received at a later date.

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HSC Finance, Banking, and Bima 1st Paper 3rd Chapter Note Time Value of Money