Time Value of Money Application Paper

An important concept in finance is time see of of money (TVM), which means that cash received at several(predicate) quantify has different values. A dollar today is worthy to a greater extent than the same dollar tomorrow. TVM concepts serve up a charabanc or investor understand the benefits and the future cash flow to supporter the manager or investor if the future benefits yield justify the menage cost of the project or investment. In this paper, I bequeath identify and discuss how different businesses use this concept for the attainment of their business. (Moyer, 1998) mercantile banks mercantile banks use the concept of TVM for the betterment of their business. Commercial banks proceeds deposits from case-by-case and institutional customers, which the bank then uses to extend book of facts to opposite customers. They convey money by earning more in absorb from borrowers of business loans, auto loans, mortgages, and home repair loans than they attain in int erest to those whose deposits they accept. (Block and Hirt, 2002) Banks also render local operate including notary, true(p) deposit boxes, and merchant banking as well as furnish loans in the form of credit notification charges. Through this process, Commercial banks look at a tremendous amount of money in the difference between the costs of their funds.

Banks earn 5 to 14% interest on most of their loans and only give birth depositors 1%, if anything, on checking accounts and 2 to 3% on savings accounts. (College Journal, 2007)Credit lineup financial service companiesThese companies use the similar concept of TVM to ma ke money for themselves. Credit cards use a ! unsubdivided terminology they provide convenience and allow the consumer to make purchases with nearly a month to pay for them before finance charges quetch in. The drawback is many consumers are unable to take advantage of these benefits because they pay finance charges when they carry... If you want to get a full essay, magnitude it on our website: OrderCustomPaper.com

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