Money has a time value because it can earn more money over time

Money has a time value because it can earn more money over time

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Money has a time value because it can earn more money over time. A number of terms involving the time value of  money were introduced in this chapter: Interest  is the cost of money. More specifically, it is a cost to the borrower and an earning to the lender above and  beyond the initial sum borrowed or loaned. Interest rate  is a percentage periodically applied to a sum of money to determine the amount of interest to be added  to that sum. Simple interest  is the practice of charging an interest rate only to an initial sum. Compound interest  is the practice of charging an interest rate to an initial sum and to any previously accumulated  interest that has not been withdrawn from the initial sum. Compound interest is by far the most commonly used  system in the real world. Economic equivalence
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This note was uploaded on 08/14/2011 for the course ECON 103 taught by Professor Profkinney during the Spring '11 term at Athens Tech.

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