Question

Describe the time value of money. If you were offered $900 now or $1,000 one year from now, which would you choose and why?

Answer 1

Time value of money means that there would be a depreciation in the value of money due to passage of time because there are elements involved like interest rates and inflation rate so that the value of money will be considerably going down with time.

The same amount of money which you will have today is having the higher worth than the same amount of money you will have tomorrow, because there would be an element of inflation that would be impacting the value of money on the downside.

I will always be trying to accept instant money, if I am able to make higher rate of return than the money which have been offered one year after.

In this case if I am able to to make the value of $900 into more than $1,000 then I would be looking to get the money instant, and invest for better rate of return.

If I will not be able to make the money at that rate of interest to beat $1000 after 1 year then I would be e more happy to receive the amount after year