Time Value of Money Application Paper

IntroductionAn important concept in finance is time have got of money (TVM), which means that cash received at descriptor times has different values. A dollar today is determine more than the same dollar tomorrow. TVM concepts friend a motorcoach or investor understand the benefits and the future cash flow to dish up the manager or investor if the future benefits allow justify the characteristic cost of the project or investment. In this paper, I testament identify and discuss how different wrinklees use this concept for the access of their business. (Moyer, 1998) moneymaking(prenominal) bankscommercial banks use the concept of TVM for the betterment of their business. Commercial banks take deposits from direct and institutional customers, which the bank then uses to extend credit to another(prenominal) customers. They beguile money by earning more in affaire from borrowers of business loans, auto loans, mortgages, and home repair loans than they kick in in int erest to those whose deposits they accept. (Block and Hirt, 2002) Banks also render local services including notary, out the hook(predicate) deposit boxes, and merchant banking as well as hold in loans in the form of credit table charges. Through this process, Commercial banks lease a tremendous amount of money in the difference between the costs of their funds.

Banks earn 5 to 14% interest on most of their loans and only digest depositors 1%, if anything, on checking accounts and 2 to 3% on savings accounts. (College Journal, 2007)Credit placard financial service companiesThese companies use the similar conc ept of TVM to make money for themselves. Cre! dit cards use a primary terminology they provide convenience and allow the consumer to make purchases with intimately a month to pay for them before finance charges recoil in. The drawback is many consumers are unable to take advantage of these benefits because they pay finance charges when they carry... If you want to get a full essay, night club it on our website: OrderCustomPaper.com

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