An advertised monthly lending rate of 0.9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. Discuss how you may have used TVM in a recent investment or loan decision and explain some of the TVM details that may have been involved in your transaction.
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Accounting: Dissertation Chapter Discussion
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Use of TVM in Recent Investment Decision
The time value for money (TVM) is a pertinent concept in financial management. It is based on the idea that money received now is worth money to be received in future. The money available in present time is worth more than future money since money available could be employed for investment decisions thus accruing more income (interests) in present time. However, many details are often overlooked while making borrowings.
The idea of time value for money has been employed in my $ 2000 loan. The loan obtained recently would be invested by making personal stock investment account. The investment provides about 8% interest earnings per year. This would mean at the end of a year, the principal loan amount borrowed would have grown in value, adding an additional income within a year. However, while making the borrowings, there were certain details that not considered. According to (Maddaloni & Peydró, 2011), the bank advertized lending rates and the actual annual interest rates vary. Although the banks have adopted and employ the Truth in Lending Act, there is likelihood for borrowers to overlook certain details while making borrowings. For my case, other expenses that were charged by bank, suc………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….
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