Money Importance of Money Money is an essential and basic necessity in a modern economy. In the beginning of human existence, human needs were so simple that they could be satisfied by barter system , i.e., exchange of goods for goods. In baster system, an individual produces some goods in greater quantity than what he could consume and then exchanges the extra units with another individual for something he needed in return. Barter system suffered from lack of double coincidence of wants, lack
Words: 4008 - Pages: 17
CHAPTER 2: THE TIME VALUE OF MONEY This chapter consists of five sections: the first section explains the time value of money and the factors that affect the time value of money; The second part will help to distinguish the types of cash flow; The next two sections will discuss how to determine the present value and the future value of cash flows; The final section will guide on how to plan an amortized loan. Before we start, we need to clarify a problem together, which is why we have to study
Words: 2292 - Pages: 10
Time Value of Money Chad McDade FIN/200 November 11, 2011 Markques McKnight Time Value of Money The time value of money tells us that money available to us today is worth more than money available to us in the future; this is because of the earning potential of money. Money has an earning potential because of interest – money placed in an interest bearing account or investment earns money. If we place $1000 in a savings account that earns 5% interest at the end of a year we would have
Words: 513 - Pages: 3
in the money as delta of calls and puts are closely related for same Strike price (Put–Call Parity) and depending on Theta and Vega of the option. * Delta is sensitive to changes in volatility and time to expiration If expiry time or volatility is more there is less certainty about whether the option will be ITM or OTM at expiration, and is reflected by delta of their call and put options. * As time passes, the delta of in-the-money options increases and the delta of out-of-the-money options
Words: 2046 - Pages: 9
Why do we say money has time value? When speaking of time value of money, it refers to the fact that money to be received or paid at different times is worth different amounts as time moves forward. 2. Why is it important for business managers to be familiar with time value of money concepts? This is important for managers to understand because they are expected to maximize the value of todays and all future dollars. Understanding money has a different value at different times will help them
Words: 446 - Pages: 2
Chapter 6 TIME VALUE OF MONEY Alex Tajirian Time Value of Money 6-2 1. OBJECTIVE # Derive a valuation (pricing) equation based on cash flow (amount, timing, & risk). Time Value of Money analysis involves: ! ! What is $1 worth 10 years from today (Future Value)? What is $1 to be received in 10 years worth today (Present Value)? # # Applications ! ! ! ! ! ! ! Loan amortization stated vs. effective interest charged rebate vs. low financing pricing of bonds (Chapter 7) pricing
Words: 4009 - Pages: 17
THE HISTORY OF MONEY In the beginning, there was no money. 1. Self-sufficiency: families produced what they consumed and consumed what they produced. 2. There was no need for exchange. 3. No exchange meant no need for money. The advent of specialization spurred exchange, which led to the earliest barter systems. BARTER Barter is defined simply as good-for-good exchange. There are two main difficulties with barter. 1. Double coincidence of wants: • Occurs when traders are willing
Words: 952 - Pages: 4
economy Numismatics is the scientific study of money and its history in all its varied forms. Many items have been used as commodity money such as naturally scarce precious metals, cowry shells, barley, beads etc., as well as many other things that are thought of as having value. Modern money (and most ancient money) is essentially a token — in other words, an abstraction. Paper currency is perhaps the most common type of physical money today. However, objects of gold or silver present many
Words: 4016 - Pages: 17
Compound Interest 2. Continuous Money Flow: Total money flow, present value, accumulated amount of money, continuous deposits. 3. Annuities 4. Amortizations and Sinking Funds Assoc. Prof. Nguyen Dinh Dr. Nguyen Ngoc Hai CALCULUS 2 (BA) Simple and compound interest • If you borrow money you have to pay interest on it. If you invest money in a deposit account you expect to earn interest on it. Interest can be interpreted as money paid for the use of money. • The original amount borrowed
Words: 4016 - Pages: 17
Money is one of the most important elements of economic science. It is truly a great invention for man. Every body is familiar with it and uses it in one form or the other. Although in final analysis, it is the real goods and services, which can satisfy our wants, but money is the intermediary. It is through money that we get access to goods produced by others. Money is running through economics system as blood is running in our body. In a way, money is much simple a nod common thing that even
Words: 1455 - Pages: 6
