An advertised monthly lending rate of 9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. Discuss how you may have used TVM in a recent investment or loan decision and explain the TVM involved in your transaction.
If you have not used TVM in the past financial transactions what practical TVM application would you expect to encounter in your future.
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The idea behind time value for money (TVM) emanates from the fact that the value of money keeps changing from time to time. The amount of money that could have been used to buy an item ten years ago may not be the same amount to buy the same item today. This is a result of inflation which makes the purchasing ability of money to reduce (Kahn & Baum, 2020). The changes in the value of money may, however, be overlooked when one considers interest caps imposed for short time spans such as the case highlighted herein. Although I have not experienced the time value of money in the last financial transactions, I am certain I am bound to encounter an application of this concept in the near future. The probable example that I may easily meet in the near future is in line with sinking fund problems. For example, as a prospective financial manager, I may be faced with situations where there will be a need to come up with a yearly payment in…
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