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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The value of an asset or cash at a specified date in the future ... 
Annual Equivalent Rate  AER
Interest that is calculated under the assumption that any interest ...

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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 >> 
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