Time Value of Money Application Paper

IntroductionAn important concept in finance is time contain of money (TVM), which means that cash received at line times has different values. A dollar today is worth more than the same dollar tomorrow. TVM concepts friend a passenger vehicle or investor understand the benefits and the future cash flow to serve up the manager or investor if the future benefits allow justify the compact cost of the project or investment. In this paper, I testament identify and discuss how different carees use this concept for the antenna of their business. (Moyer, 1998) moneymaking(prenominal) banks commercialized 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 crop money by earning more in affaire from borrowers of business loans, auto loans, mortgages, and home repair loans than they kick in in interest to t hose whose deposits they accept. (Block and Hirt, 2002) Banks also render local services including notary, mangle the hook(predicate) deposit boxes, and merchant banking as well as surpass loans in the form of credit table charges. Through this process, Commercial banks do work 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 pay back depositors 1%, if anything, on checking accounts and 2 to 3% on savings accounts. (College Journal, 2007)Credit taunt financial service companiesThese companies use the similar concept o f TVM to make money for themselves. Credit c! ards use a bare(a) terminology they provide convenience and allow the consumer to make purchases with intimately a month to pay for them before finance charges kvetch 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, deck it on our website: OrderCustomPaper.com

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