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Time value of money concepts

Why is a dollar today worth more than a dollar tomorrow?
What is an annuity and give some examples.
What is the effect of compounding more frequently that once per year?
What is the definition of effective annual rate?

Comment on the Focus on Practice Question in the chapter titles: New Century Brings Trouble for Subprime Mortgages

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Why is a dollar today worth more than a dollar tomorrow?

In finance, it is said that a dollar today is worth more than a dollar tomorrow because of inflation. In life, it is assumed that the price of commodities always goes up as a resource of scarcity or as a result of exerted pressure for the product's demand. As a result of this it is said thus the purchase or investment today is a better option since assets can only increase in value, rather than holding onto the money to do something with it tomorrow.

What is an annuity and give some examples.

An annuity can basically be said to be an equal stream of income for a specified period of ...

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The time value of money concepts are examined.

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