DEFINITION of 'Time Value of Money  TVM'
The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.
Also referred to as "present discounted value".
INVESTOPEDIA EXPLAINS 'Time Value of Money  TVM'
Everyone knows that money deposited in a savings account will earn interest. Because of this universal fact, we would prefer to receive money today rather than the same amount in the future.
For example, assuming a 5% interest rate, $100 invested today will be worth $105 in one year ($100 multiplied by 1.05). Conversely, $100 received one year from now is only worth $95.24 today ($100 divided by 1.05), assuming a 5% interest rate.
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What impact does inflation have on the time value of money?
The impact that inflation has on the time value of money is that inflation decreases the value of a dollar over time. The ... Read Full Answer >> 
Why is the time value of money (TVM) an important concept to investors?
The time value of money (TVM) is an important concept to investors because a dollar on hand today is worth more than a dollar ... Read Full Answer >> 
Why does time value of money (TVM) assume that a dollar today is worth more than ...
The time value of money, or TVM, assumes a dollar in the present is worth more than a dollar in the future because of variables ... Read Full Answer >> 
Why would you take DCF into account rather than simply projecting future revenues?
Discounted cash flow, or DCF, analysis is preferred by market analysts for two basic reasons. One, because of the firmly ... Read Full Answer >> 
What does it mean to roll a derivative contract?
A derivative is a financial instrument in which the price of the derivative is dependent on an underlying asset. A derivative ... Read Full Answer >> 
What is affected by the interest rate risk?
Interest rate risk is the risk that arises when the absolute level of interest rates fluctuate. Interest rate risk directly ... Read Full Answer >>

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