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Essay / Research Paper Abstract
This 4 page paper looks at different aspects concerning the time vlaue of money. The paper explains interest rates and compounding, present value and future value of investments, opportunities costs, annuities and the rule of ’72. The bibliography cites 3 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEtimeval.rtf
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Unformatted sample text from the term paper:
at some issues of time value. 1. Interest rates and compounding. When money is held in a cash form it remains the same numerical value. Where money is invested, even
when remaining liquid as with bank deposits, the investment is likely to earn interest. The interest may be a variable or fixed rate and will be indicated as a percentage
of the amount that is invested as is usually quoted on an annual basis. The concept behind this is that the money is invested with an intermediary, such as a
bank, they will then pay the depositor for the use of their money. In turn the intermediary such as a bank, will then lend the money out at a higher
rate keeping the difference as their income. The investment may also be made directly with a company, where the company are paying for the use of the funds with the
interest rate payable. Interest rates will also vary depending on many factors, one of the most important aspects is risk and the need to include a risk premium in the
calculation of interest rates offered where there is perceived risk (Howells and Bain,. 2003) Compounding is where interests that has already been paid will then attract further interest payments
if the funds are left with the borrower or intermediary. For example, of there is a deposit of 100 at an interest rate of 10% at the end of the
year 10 will be added on giving a new balance of 110. In the following year 10% will be 10% of the 110, giving 11. The impart of compounding on
large amounts over many years can have a dramatic impact on the capital vlaue of the investment. 2. Present Value Money received today is usually deemed to be worth more
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