The Time Value of Money is the underlying principle of compound interest which holds that an amount of money received sooner is worth more than the same amount of money received later.

Example:

If an investor has the opportunity to receive a lump sum of money in a year or within 2 years (with commensurate risk), the earlier date will always be the choice.

Related Topics

Future Value of an Annuity of $1 per period

Present Value of an Annuity of $1 per period

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