Free

Money & Payments / Present value - Coursework Example

Comments (0) Cite this document
Summary
These include Medium of exchange in trade, store of value or measure of value, a standard of deferred payment as well as a unit of account to…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.6% of users find it useful
Money & Payments / Present value
Read TextPreview

Extract of sample "Money & Payments / Present value"

Money and Banking In answering the question of how inflation affects the functions of money, it is important to some of the common function of money. These include Medium of exchange in trade, store of value or measure of value, a standard of deferred payment as well as a unit of account to make accounting records for transactions involving money. On the other hand, inflation referrers to a situation where the general prices of goods and services are increasing continuously for a significant period say one year. In other words, inflation leads to decline in money value over time. Consequently, inflation has a direct effect on the money function of serving as a medium of exchange. In a situation where an economy is experiencing high inflation, the value of money keeps on falling hence making it difficult to place the value of goods in that economy generally. In short, this function of money becomes less effective in a situation of high inflation. With the increase in inflation, the volatility of the same tends to increase unpredictably. With this, it becomes difficult to place a particular value on money. This in turn reduces the effectiveness of money as a store of value. On the same note, the use of money as a condition for deferred payment becomes ineffective with high rates of inflation (Hammonds, 2006).
With time, payment systems will evolve into electronic payment systems that are known as e-commerce. In actual sense, electronic commerce is rapidly growing in many markets around the globe. This is attributable to the development of the national information infrastructure that have facilitated the transfer of money from one place to another electronically. This form of payment will benefit the society in reducing transaction costs in various ways, To begin with, with e-commerce, the transaction costs remain the same regardless of the number of transactions involved. This is unlike the case of cash payments where the number of transactions is a factor. This payment system is also accurate and eliminates errors involved with human processes. This means that the number of employees needed to transact in such a system is few hence reducing the general cost of the said business (Hammonds, 2006).
In addressing the inverse relationship between security prices and interest rates, the security to be considered will be a bond. Bonds are usually bought directly through banks or mutual funds. Upon issuance of new bonds, they carry coupon rates that are either equal or close to the prevailing market interest rate. However, security prices in general and in this case bond prices have an inverse relationship with interest rates. This implies that once the interest rate goes down in an individual economy, the value of securities goes up. The reverse is also true. As such, investors in various securities should have a keen eye on different interest rates prevailing in markets that can be invested in.
In negotiating an automobile lease, a person ought to have the knowledge of a couple of concepts regarding the lease of cars. First, it is imperative to note that the lease payments for an automobile are dictated by the value or price of that car. On a similar note, it is critical to know that a person could negotiate for the price of an automobile prior to leasing it. The lower the price, the lower the lease payments. Other information that is helpful in this negotiation includes the following: the vehicles invoice price, excess mileage costs that apply in case the limit set at the pint of lease is exceeded as well as the exact time duration that an individual wants to take a contract. This is because leases taken for a longer period have less monthly than shorter terms. This can hence misguide a person to make a lease for an automobile for a longer period than the desired (Jasper, 2005).
References
Hammonds, H. (2006). Banking: Money. South Yarra, Victoria: Macmillan Education Australia Pty.
Jasper, M. (2005). Auto leasing. Dobbs Ferry, NY: Oceana Publications. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Money & Payments / Present value Coursework Example | Topics and Well Written Essays - 500 words”, n.d.)
Money & Payments / Present value Coursework Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/macro-microeconomics/1688851-money-payments-present-value
(Money & Payments / Present Value Coursework Example | Topics and Well Written Essays - 500 Words)
Money & Payments / Present Value Coursework Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/macro-microeconomics/1688851-money-payments-present-value.
“Money & Payments / Present Value Coursework Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/macro-microeconomics/1688851-money-payments-present-value.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Money & Payments / Present value

Present Value

...?Part A. PV=FV i)t PV=15,000 0.07 PV=$14,019 PV=FV i) t PV=15,000 0.04 PV=$14,423 B. Account A PV=6,500 0.06 PV=$6,132 Account B PV=12,600/ (1+0.06)2 PV=$11,214 C. At 7% discount rate At 5% discount rate PV = $ 175,421,661 At 3% discount rate PV = $182,858,207 The present value of the income stream is the lowest at 7% discount rate and the highest at 3% discount rate. This is because at a high discount rate the income due in the future is worth very little today and at a relatively low discount rate the income due in the future is worth relatively more. Part 2 In my opinion the Interstate Travel Centre business will be the riskiest of all the business plans as it requires an initial investment of...
4 Pages(1000 words)Essay

Time Value of Money

...?Introduction The objective of this paper is to get an understanding of the concept of the time value of money. We first study the two important concepts in the area: Present value and the Future Value and its importance to the subject of corporate finance. We then look at some questions which calculate the present value of the future cash flows and the future value of present cash investments. 1. The concept of time value of money is critical to the world of Finance and is very often the first subject that is taught in a Corporate Finance class. It is based on the simple premise that “A penny in hand today is worth more than a penny in hand tomorrow”. This is on the basis of assumption that the money in hand today can be invested... in...
4 Pages(1000 words)Essay

The Value of Money

...into a value today; just like you can calculate the value to which a certain amount of money today will convert into on a future date. Mortgage loans are Mortgage loans are an example of the proper application of the time value of money; reasons being the loans are given by deciding the series of future payments that are to be paid to the lender for a house that is bought. More interest is paid in the beginning because the procedure follows compounding interest method. In this case, with each payment, as the principle amount to be returned decreases, the interest that has to be paid on it decreases too. The terms that...
3 Pages(750 words)Essay

The Value of Money

...Amy Gunn Dr. Holmes ENC 1101 03 November The Value of Money As a child I had no concept of where money came from. I thought money was providedto every family, whether a parent worked or not. I remember going to the grocery store with my mom and every time she went, I would plead with her to buy me candy or a toy that I wanted. I did not care about how much it cost. I just knew my mother had the money to get me what I wanted. Now that I’m all grown up and have a family of my own, I realize that money is something that has to be earned. When I was eight years old, I remember going to Wal-Mart with my mom. As we strolled through the...
3 Pages(750 words)Essay

Time value of money

...TIME VALUE OF MONEY Time value of money is a term that measures the increase or decrease in the value of money with respect to time. The buying powerassociated with certain amount of money; do change as the time passes and multiple factors such as inflation, exchange rates, interest rate and other fluctuations economic conditions come into play. Two factors are central in this concept; present value and future value of money (Homer and Leibowitz, 269-276). One of the important financial decisions that many people make at individual level, is regarding...
1 Pages(250 words)Essay

Time Value of Money

...Time Value of Money al Affiliation: Question Time value of money is the consideration of the change in value of a given amount of money over a given period of time. This is because there are certain factors within the economy that create a state where a given sum of money, say $1,000, cannot purchase the same amount of items presently, as it could 5 or 10 years ago. This concept is used to analyse investment in terms of the value added to the initial investment over a given period of time. Question 2 An ordinary annuity is a sequence or chain of equal payments on an...
3 Pages(750 words)Coursework

Time Value of Money _

...Time Value of Money Affiliation “Take heed if your are buying or selling annuities”, is an article that provides an imformatic look at the ever changing regulatory landscape, and its relation to annuity products. It also elaborates on the responsibilities a fiduciary has when it comes to selling these products to a client. The article discusses the criteria, legal factors and issues an attorney has to consider as a trust fiduciary on annuity investments in the US. Various federal and state rules have been trying to narrow down the sale of equity indexed annuities to suitable investors. It is important that lawyers should note the key issues in annuity sale and investment. The relationship between a trustee and the beneficiaries... that the...
3 Pages(750 words)Essay

Present Value

...Present Value Present Value Part I A. Present value, PV = C1 r)n = 15,000 0.07 14,018.69The present value = $14,018.69 At 4%: Present value = 15,000 / (1+0.07)1 = 14,423.08 B. Account A, C= 6,500 in 1 year at 6%: Present value = 6,500 / (1+0.06)1 = $6,132.08 Account B, C=12,600 in 2 years at 6%: Present value = 12,600 / (1+0.06)2 = $11,213.96 C. Year 1 = $49,000,000, Year 2 = $61,000,000 and Year 3 = $85,000,000 Total = $195,000,000 Present value = 195,000,000 /...
3 Pages(750 words)Assignment

Net Present Value

...The concept of net present value is an analytic tool that can help both corporations and novice investors. From an investor standpoint the use of netpresent value is very useful because net present value takes into consideration the time value of money. Due to inflation money depreciates over time. A person has $100 saved up in a cookie jar and leaves it there for five years will lose money because those $100 will not have the same purchasing power five years into the future. Using the net present value table can help a person determine how much interest...
1 Pages(250 words)Essay

Money and Payments

...Money and Payments Money and Payments Question Payment systems have gone from physical transactions to electronic ones within a span of two decades. Both types of payments undergo protocols and processes. However, the electronic payment system has undergone rapid and efficient transitions that allow for quicker protocols and processes. Quicker protocols and processes led to the decrease of transaction costs over time. Before the electronic payment system, commercial law required both ends of a transaction to deal with each other individually by transferring cash or assets physically (Mastrianna, 2012)....
1 Pages(250 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Coursework on topic Money & Payments / Present value for FREE!

Contact Us