Beginning Calculator and The Time Value of Money

Lesson
Materials

As you know, a dollar received today is worth more than a dollar received a year from now. Why? First of all, because of inflation—goods and services will cost more a year from now, so that means that your dollar will buy less than it can today. Secondly, and more importantly, a dollar received today is worth more than a dollar received a year from now because of the “interest earning power” that today’s dollar has. A dollar received today will accumulate a year’s worth of interest, which at a 10% interest rate would be a total of $1.10 after the end of one year. If you have to wait a year to receive your $1.00, then you have lost $.10 of earned income. This is the time value of money. This concept is the key to understanding the discounted mortgage process. Time is money. The longer that you have to wait for your cash, the less value it has. Conversely, the sooner that you get your money, the more value it has.

Review this class from my 2020 NoteBuyer’s Academy for the basics. The next lesson includes case studies and exercises for practice.

 

 

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