Time value of Money
Concept of Time Value of Money Finance is an art and science of money management. The time value of money is one of the best concept in fiance. Money has time value. For example, if you're invested Rs. 100 today for a next five years @ 10% p.a. the future value will not be same as today. The time value of the money is a concept that present worth of money is more than same amount in the future. In short, receiving money Today is preferable than receiving same money in the future. It has happened due to following three reasons: Reinvestment opportunity: Money received today can be reinvested to get further return. Inflation: Inflation brings upward change in the price level with the passes of time. Sacrifice of Present Consumption: For making an investment a person must have saving habit by sacrificing his/her present consumption pattern so that they can easily invest to get better and further return. Components of Time Value of Money In this topic we have to understand about