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Do you think that TVM is like driving a car?

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Your answer "I think that driving a car and the time value of money are a good analogy. First, the longer you drive your car, the more gasoline you use. Hence, at the end of the journey, that is when you reach your destination, the value of the gasoline in the automobile is much less than when you started the journey. Second, the longer you drive the car, or the more you use it, its value in the second hand market becomes lesser and lesser"

However, one of the students disagree, and comments the following "TVM is the ideal of money available at the present time and is worth more than the same amount in the future due to its potential earning capacity". I pretty much think its the opposite. I am not gaining anything in the future but arriving to my destination"

Can you please comment on your example of driving car !

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Solution Summary

The expert determines if they think TVM is like driving a car.

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ANSWERS

Not necessarily. Time value of money means that a dollar today is worth more than a dollar ...

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