Time Value of Money

Running head: TIME VALUE

Time Value of Money
Vicki Quantilias
University of Phoenix
Quantitative Reasoning for Business
Robert Williams
February 21, 2008

Executive Summary
      This paper examines the effect that time has on money in terms of worth and value.   By explaining the variables inflation and compound interest, a better understanding is gained of money’s purchasing power over time.   Examples of each variable will be given along with equations to better illustrate how time is the one constant that affects the value of money and why money is the dependent variable.   Compounded interest helps people compensate for the loss inflation brings to their personal earnings. The importance of this compounded interest will demonstrated throughout this paper.

                            Table of Contents
      Executive Summary 2
      Introduction 4
      Present Value of Money 4
      Compound Interest 6
      Inflation 7
      Conclusion 7
      References 9

                            Time Value of Money
      No matter where or when an individual grows up in the United States, that person will hear the phrase that “Time is money.”   Money makes the world go round and it is a constant focus of a capitalist nation such as America.   People not living in this country will understand that the currency they use makes their world turn.   People strive for it every second of every day.   Individuals are judged by their determination to get money and how much of it they currently have.   People constantly use the term mentioned earlier because it is always changing.   Time effects money constantly and continuously.   As time increases money decreases in value.   We have t understand this relationship to invest and trade responsible and in order to steer clear of being taken advantage of.   In the United States the money we had last week or last month is not worth the same as the money we have currently nor...