ARTICLE:Time value of money and investment analysis
ARTICLE: TITLE Time value of money and investment analysis BY Bruce J. Sherrick, Paul N. Ellinger, David A. LinsCONCEPT:This article is about the importance of time value of money. The researchers focus onthe concept of time value of money and problems related in measuring TMV. Theresearchers also give the solution of the problem in measuring TMV. By adopting thesechanges the TMV will measure correctly and help us in mitigating risk associated withcalculating future value of a bond, stock and investment. The researcher divide problemassociated with TMV in 3 main categories. First the direction in time that cash flows areconverted to equivalent values, second cash flows are single or repeated series, andlast the decision variables are unknown value of the problem. The problem will beremoved in two phases first identifying the type of problem exists and secondly correctlyapplying the mathematical calculation.EXPLANATION:This article represents the importance of time value of value and problem associatedwith measuring TMV. First we have to define TMV. TMV represent the constraintassociated with the value of money. With the passage of time the value of money eitherdecrease or increase so we have to adjust this fluctuation to keep the investorinvestment on the safe side. This adjustment is actually the concept of time value ofmoney. The value of money fluctuates because of inflation, risk, human preferences inspending money and opportunity cost associated with investing money.The researcher divide the problem associated with calculating TMV into 3 maincategories, first the direction in time that cash flows are converted to equivalent values,second cash flows are single or repeated series, and last the decision variables areunknown value of the problem.
The problems are labeled as, single payment & uniform series compounded amount,sinking fund deposit, single & uniform series present value, capital recovery or loanamortization. The problem associated with TMV will be removed in two phases. 1) Identifying the problem correctly 2) Applying the correct mathematical calculation CONCLUSIONThis article help us in finding the time value of money with better adjustment of value ofmoney. The problems associated with the TMV could be mitigate by adopting thechange in the formulas of TMV as described in this article. So it will help us to find abetter adjusted future or present value of money. It is also mentioned that drawingtimeline associated with the cashflows are also helpful in finding the problem.In a nutshell this article helps: The user in understanding the reasons to utilize the TMV approaches. The user in understanding the problem associated with measuring TMV. Able the user to categorize the problem correctly. The user in understanding the background and derivation formula used in TMV. Able the user to apply the correct technique to solve the TMV.