Lecture Money and banking - Lecture 8: Time value of money

  • 30/08/2018 05:16:52
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Lecture Money and banking - Lecture 08 presents the time value of money. This chapter presents the following content: Time value of money, future value concepts, present value, application in financial environment.

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Money and Banking Lecture 8 Review of the Previous Lecture • Financial Institutions • Structure of Financial Industry Topics under Discussion • Time Value of Money • Future Value Concepts • Present value • Application in financial environment Time Value of Money • Credit is one of the critical mechanisms we have for allocating resources. • Even the simplest financial transaction, like saving some of your paycheck each month to buy a car, would be impossible. • Corporations, most of which survive from day to day by borrowing to finance their activities, would not be able to function. Time Value of Money • Yet even so, most people still take a dim view of the fact that lenders charge interest. • The main reason for the enduring unpopularity of interest comes from the failure to appreciate the fact that lending has an opportunity cost. • Think of it from the point of view of the lender. • Extending a loan means giving up the alternatives. While lenders can eventually recoup the sum they lend, neither the time that the loan was outstanding nor the opportunities missed during that time can be gotten back. • So interest isn`t really "the breeding of money from money,`` as Aristotle put it; it`s more like a rental fee that borrowers must pay lenders to compensate them for lost opportunities. ... - tailieumienphi.vn


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