What is Time Value Money (TVM) and it's importance in financial situations?
The basic idea of time value of money is that a dollar today is worth more than a dollar tomorrow. That is you would rather have a dollar now than later, BUT would rather pay later if possible.
For example, If you're like most people, you would choose to receive the $10,000 now. After all, three years is a long time to wait. Why would any rational person defer payment into the future when he or she could have the same amount of money ...
This solution describes the concepts of Time Value Money and provides a structured examples and also explains its importance in financial situations.