Investopedia

Continue to Site »

Time Value of Money - TVM

Filed Under » ,
Dictionary Says

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 Says

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.

Related Video for 'Time Value of Money - TVM'

Articles Of Interest

  1.

    DCF Valuation: The Stock Market Sanity Check

    Calculate whether the market is paying too much for a particular stock.

  2. Understanding The Time Value Of Money

    Find out why time really is money by learning to calculate present and future value.

  3. For IRAs, Time Is Money

    Don't procrastinate. The timing of your contributions can mean thousands more in savings.

  4. Digging Into The Dividend Discount Model

    The DDM is one of the most foundational of financial theories, but it's only as good as its assumptions.

  5. Time Value Of Money: Determining Your Future Worth

    Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation.

  6. Calculating The Present And Future Value Of Annuities

    At some point in your life you will have to deal with a series of fixed payments over time, so it pays to know how to calculate them.

  7. Understanding The Time Value Of Money

    The time value of money is a fundamental concept in finance - and it influences every financial decision you make, whether you know it or not. Learn the basics here.

  8. Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.

  9. Examining Stereotypes In Investing

    Irrespective of age, sex and other such factors, no normal investor wants an unsuitable investment. How much people really understand about their investments depends on various factors, including ...

  10. The Basics Of A Financial Analysis Report

    Running financial analysis on a company or industry is a key skill every investor must learn and understand how to undertake without which an ineffective financial report and investment recommendation ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center