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Time value of money refers to?

Updated: 9/16/2023
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14y ago

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Over the years, money either rises in value or lowers. Like in the 1910's, 59 bucks was like 400 bucks today!

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14y ago
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Q: Time value of money refers to?
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Cost refers to the total spent for goods or services including money and time and labor while value refers to the the amount that is considered to be a fair equivalent for a given price.


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The Time Value of Money is a foundational principle in finance that states that money received today is worth more than the same amount received in the future due to its potential earning capacity. In the context of bond valuation, the Time Value of Money is used to calculate the present value of future cash flows generated by the bond, including interest payments and principal repayment. By discounting these future cash flows back to their present value using an appropriate discount rate (which accounts for the time value of money), the current price of the bond can be determined.


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