Time value of money

Based on Time preference theory (the relative valuation placed on a good at an earlier date compared with its valuation at a later date), the time value of money describes the greater benefit of receiving money now rather than later. It explains why interest is paid or earned. Interest, whether it is on a bank deposit or debt, compensates the depositor or lender for the time value of money.

Like this article? Share it so your friends can see it too!Share on FacebookShare on Google+Tweet about this on TwitterDigg thisPin on PinterestShare on Tumblr