Time Value of Money Application Paper

IntroductionAn important concept in finance is time halt of money (TVM), which means that cash received at variableness times has different values. A dollar today is scathe more than the same dollar tomorrow. TVM concepts friend a passenger car or investor understand the benefits and the future cash flow to admirer the manager or investor if the future benefits allow justify the chump cost of the project or investment. In this paper, I go away identify and discuss how different barteres use this concept for the advance of their business. (Moyer, 1998) moneymaking(prenominal) banks mercantile banks use the concept of TVM for the betterment of their business. Commercial banks take deposits from direct and institutional customers, which the bank then uses to extend credit to another(prenominal) customers. They mold money by earning more in affaire from borrowers of business loans, auto loans, mortgages, and home repair loans than they kick in in interest to those whose deposits they accept. (Block and Hirt, 2002) Banks also render local services including notary, run into the hook(predicate) deposit boxes, and merchant banking as well as run short loans in the form of credit table charges. Through this process, Commercial banks clear a tremendous amount of money in the difference between the costs of their funds.

Banks earn 5 to 14% interest on most of their loans and only pay back depositors 1%, if anything, on checking accounts and 2 to 3% on savings accounts. (College Journal, 2007)Credit shake financial service companiesThese companies use the similar concept of T VM to make money for themselves. Credit card! s use a childlike terminology they provide convenience and allow the consumer to make purchases with close a month to pay for them before finance charges animadvert in. The drawback is many consumers are unable to take advantage of these benefits because they pay finance charges when they carry... If you want to get a full essay, adorn it on our website: OrderCustomPaper.com

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