Question

A standard and generic simple question in economics are: Would you rather receive $100 today or $100 a year from now? What about $105 a year from now? Go beyond the simple answer to explain TVOM using an example from your experience or a scenario based on material.

PLEASE TYPE OUT THE RESPONSE

Answer 1

=>Explanation ::

When One Receive $100 Today Or Receive $100 A Year from Now It is Always Profitable To Receive $100 From Year Now Because The Value of Money Theory Says that Price Of Money Or Purchasing Power Change According to time so In One Year the Value of $100 Change and It Goes to $ 105 So $5 Is Return for One Year for that $100. So waiting one Year To Receive $100 It Increase its Price 5% So we Receive More Money After One Year. in This Situation According to theory $100 Shows Present Value of Money And $105 Shows Future Value Of Money. According To My Experience Investing $100 For 10% Interest rate Then We Receive It after One Year with The Amount Of $110 So Here value Of money increase To $10 Because Of the Interest Rate So If We invest $100 Today it Is worth $110 After A Year.

Time Value Of money Is Most Important Theory In All financial Transaction Its Helps The investor to calculate their return of investment In Future