Categories
Concepts

Time value of money

Time value of money (TVM) is a core concept in finance. The main statement of the concept is that one dollar today has more value for an investor compared to one dollar tomorrow. Because if an investor receives one dollar today, he can invest into for example a deposit account and receive interest for this one dollar. So the one dollar, he received today is with a daily interest of 1% worth one dollar and one cent tomorrow. Thus if an investor is indifferent, he would have to receive one dollar and one cent tomorrow.