#TVM Application of time value of money in the Financial Wo | Finance knowledge Technology

#TVM

Application of time value of money in the Financial World

There are a number of applications of time value of money in the real world and we often use it in our day to day life

Some of the common ones are stated below

Bond value calculation

Its a very useful tool in bond value calculation

Say a bond fetches an interest of 10% and will pay Rs 1,00,000 after it expires in 5 years

You can simply calculate the present value of all those future cash flows (including coupon payment and principal amount) to compare it with the sums you pat today to judge, whether investment in bonds really makes sense or not


EMI Calculation

You can use TVM to compute your EMI payments and also the amount which you finally pay along with the interest.


Determining House Loan

It helps in determining the amount of down payment and amount to be financed in case of taking loan amount.

Apart from this it is used in case of credit card calculations, mortages etc.