MGAB02H3 Chapter : Time Value of Money
Document Summary
If someone were to ask you if you would rather have today or next year, your answer would be. Your answer is based on the time value of money. The difference between the worth of the two amounts is interest. Many accounting and business applications use the time value of money. These applications include accounting for bonds, leases, notes and pensions. Examples of business applications include what rate of return is acceptable for investment and what interest rate to charge credit customers. There are numerous personal applications as well such as the purchase of a home vs. renting, whether to borrow for or lease a new car, and retirement planning. Let"s say that you would like to do a little retirement planning and have decided you want to be a millionaire by age 60. The power of interest and time is on your side. Payment for the use of someone else"s money is called interest.
