Topic

Financial Management Economics

Instructions

Read pages 778-780, 783-797 of Economics.

Consider the following as you read:

What is the time value of money and how can compound interest be used to calculate the present value of any future amount of money?
How is the word “risk” used in financial economics and what is the difference between diversifiable and non-diversifiable risk?

Answer preview

Time value of money (TVM) is one of the crucial concepts in financial management. Notably, time value of money can be utilized in the process of comparing investment options and give stringent solutions to challenges revolving around mortgages, loans, savings, leases and annuities. In addition to this, time value of money is usually based on the idea that a dollar that an individual has presently is worth more than the anticipation or promise that an individual will get a dollar in the future.

Word count: 226