Fin/370 Discussion Question-Wk2

Week 2 DQ 4

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?

¿Cómo se explica la utilización de TVM en el negocio? ¿Qué consideraciones se hacen en el cálculo de TVM? ¿Cómo puedes usar TVM para crear su cuenta, o plan de jubilación de otra persona?

The Time Value of Money relates to the second principle of finance. More specifically, the principle states that a dollar received today is worth more than a dollar received in the future. The Time Value of Money has many applications in business and personal finance. For instance, the time value of money helps when we are trying to decide which payment plan we prefer. Indeed, what happens if we were told that we could buy a car for $30,000 cash today; or we could make monthly payments for x period of time (Foreman, 2010).

There are several factors that we need to consider when calculating the time vale of money. Indeed, we need to consider the present value, the future value, the number of periods, interest, and the payment amount. The present value is the money available today. The longer we wait to collect the money the less is its present value (Hunt, 2010).

 Based on what I stated above, it appears that when are planning to invest on our retirement it is better to act sooner rather than later. Indeed, all the time that we take to reach our decision is money lost in our retirement plan. When we invest, we want to look for the highest interest rates that they will allow us to reach the maximum future value and enjoy our retirement (Hunt, 2010). Retirement / Time Value of Money Calculators and excel spreadsheets are available on the market and helps to determine the amount of money we will have at retirement.

Espanol:

El valor temporal del dinero se relaciona con el segundo principio de las finanzas. Más en concreto, el principio establece que un dólar recibido hoy vale más que...