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Question:


Could you explain what “time value of money” is all about?
-MikeWright


Answer:


The time value of money refers to the notion that a dollar today is worth more than a dollar tomorrow because of its earning power and the threat of inflation. Economists and financial analysts can explain it with theories and Greek letters, but perhaps it’s easier to understand by recalling the proverb that a bird in the hand is worth two in the bush. Money today is worth more than money in the future because a good home for it can usually be found that will make the money grow over time and because prices of goods and services tend to rise and so the money is likely to buy more today.
-Conrad de Aenlle



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