Functions of moneyzMedium of exchangezMeans of paymentzUnit of accountzStore of value–Value of a good or service ≈price–Value of money = purchasing power
Time value of moneyz$1 now is not the same as $1 in a week’s time, because money changes its value over time–Inflation–Growth of wealth–?zThe time value of money is how much one unit of money is worthier today than it is tomorrow or at any other date in the future
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Definition of interest rate - 1zAn interest rate is the price a borrower pays for the use of money that he doesn’t own, and the return a lender receives for deferring his consumption by lending to the borrower.zInterest rates are normally expressed as a percentage over the period of one year. It is usually denoted as “r” or “i”.