advanced time value of money

Advanced Time Value of Money
Student’s Name
Institutional Affiliation

`
TVM has the basis of the idea that money at the present time is more important as compared to the same amount in the future. This is with consideration of the potential earning capacity. Any amount of money is significantly more the sooner it is acquired; nevertheless, it undermines the concept of interest. TVM is hard to ignore when handling investment analysis, loans, various financial decisions, and capital budgeting.
The TVM considers the receiving compensation for prior expenditure. For example, one can devote some dollars for a year at a 7% yearly interest charge and acquire $ 2.06 at the ending of the year. Therefore, the future worth of the given dollar will be $2.06 considering a 7% interest rate in a one-year phase.
The key thought of the TVM is that a series of equal, receipts or evenly spaced payments promised in the potential can be changed to a similar worth at a present date (Muda & Hasibuan, 2018). The present value interest factor annuity attributes to a representation of the present value of a payment that has occurred at the end of a certain period. The present value of the ordinary annuity attribute for the present value that had a zero growth rate due to the similar amount of PMT. The growing annuity has a payment that has expectations of growth for a finite number of periods.
To conclude, the zero growth common stock make assumptions of the expected future dividends for a particular period to be constant forever.

On bond valuation, it is the summation of the present value of a given future coupon payment ending at a particular period with the present value of par value at maturity.
Reference
Muda, I., & Hasibuan, A. N. (2018). Public Discovery of the Concept of Time Value of Money with Economic Value of Time. In Proceedings of MICoMS 2017 (pp. 251-257). Emerald Publishing Limited.