IntroductionAn important concept in finance is time entertain of money (TVM), which means that cash received at variant times has different values. A dollar today is price more than the same dollar tomorrow. TVM concepts friend a autobus or investor understand the benefits and the future cash flow to help the manager or investor if the future benefits allow justify the sign cost of the project or investment. In this paper, I will identify and discuss how different businesses use this concept for the feeler of their business. (Moyer, 1998) moneymaking(prenominal) banksCommercial banks use the concept of TVM for the betterment of their business. Commercial banks take deposits from man-to-man and institutional customers, which the bank then uses to extend credit to another(prenominal) customers. They influence money by earning more in affaire from borrowers of business loans, auto loans, mortgages, and home repair loans than they kick in in interest to those whose deposits they accept. (Block and Hirt, 2002) Banks also render local services including notary, off the hook(predicate) deposit boxes, and merchant banking as well as lead loans in the form of credit table charges.
Through this process, Commercial banks make a tremendous amount of money in the difference between the costs of their funds.
Banks earn 5 to 14% interest on most of their loans and only pay depositors 1%, if anything, on checking accounts and 2 to 3% on savings accounts. (College Journal, 2007)Credit card financial service companiesThese companies use the similar concept of TVM to make money for themselves. Credit cards use a uncomplicated terminology they provide convenience and allow the consumer to make purchases with intimately a month to pay for them before finance charges kvetch in. The drawback is many consumers are unable to take advantage of these benefits because they pay finance charges when they carry...
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