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Time Value of Money in Business and Retirement Planning

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How would you explain the use of TVM in business? What considerations are made when calculating TVM? How can you use TVM to create your own, or someone else's, retirement plan?

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Solution Preview

Businesses use the time value of money (TVM) when considering one or several projects or investment options. The TVM is concerned with the fact that inflationary pressures will tend to cause the value of money to decrease over time. The increase is cyclical with some years being an enormous difference and some years being relatively flat. However, as a whole, the value of money will lessen as time progresses.

Many forces are at work that create TVM. The world is run by financial markets and investors require a return on their investments. Banks require a return on their investments in companies also; investments such as notes and long term debt. Because everyone requires a return, and because progress is ...

Solution Summary

The solution describes the time value of money and its effects on business and retirement planning.

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