Time Value of Money : Concepts and Applications

Authors

  •   Naseem Ahamed Assistant Professor, Department of Finance and Accounting, IBS - Hyderabad, IFHE University, The ICFAI Foundation for Higher Education, A Deemed-to-be University u/s 3 of the UGC Act 1956, Dontanapally Campus, Shankerpally Road, Hyderabad - 501 203

DOI:

https://doi.org/10.17010/ijf/2020/v14i5-7/153323

Keywords:

Time Value Of Money

, Compounding, Discounting, Timeline.

JEL Classification

, C40, E43, P44.

Paper Submission Date

, December 3, 2019, Paper Sent Back for Revision, February 14, 2020, Paper Acceptance Date, February 25, 2020.

Abstract

The case, at its core, explored the concepts of time value of money from the perspective of a newly joined intern in Money Smart Consultancy Pvt. Ltd. The value of money doesn’t stay static because of certain factors such as inflation at play. The value of money changes as it moves on the timeline either forward or backward. The concept of compounding was used for finding out the equivalent amount of money in the future when one moves forward on the timeline. Different types of cash flows such as lump sum, annuity, perpetuity, etc. were discussed to make the reader understand through the questions of the protagonist of this case. The rates used for compounding/discounting are indicative of the cumulative risk assumed by the investor for which he/she ought to be compensated. Through different cases of various companies, Joy discussed the concepts and their applications with his intern.

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Published

2020-07-31

How to Cite

Ahamed, N. (2020). Time Value of Money : Concepts and Applications. Indian Journal of Finance, 14(5-7), 37–43. https://doi.org/10.17010/ijf/2020/v14i5-7/153323

References

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Shim, J., & Siegel, J. (2007). Financial management. In, Understanding the concept of time value of money (2nd ed., pp. 97–114). Westland Books Pvt. Ltd.