The time worth of cash (TVM) is the idea that cash out there right this moment is price greater than the identical sum of money sooner or later. Whereas inflation step by step weakens the buying energy of cash, its price can rise over time by being invested or incomes curiosity.
The time worth of cash is an important idea in finance and investing. Primarily based on the rate of interest and the time interval concerned, it’s used to find out the current worth of future money flows, corresponding to funding returns or mortgage repayments.
