Time Value of Money"Money has a time value associated with it and therefore a dollar received today is worth more than a dollar you will receive in the future" (Block, Hirt, 2005) . The time value of money can be based on the concept that one would prefer to receive a fixed payment today rather than the same fixed payment at a future date. This paper discusses some of the key components of the time value of money and identifies the application of the time value of money in various business activities. Commercial banks use various time value of money formulas on a daily basis. An example of the application of the time value of money in commercial banking is through mortgages. Using the formula for the present value of an annuity, a bank will solve the formula to determine the monthly payment amount, the borrower's monthly mortgage payment. Credit card financial services companies are commonly known to issue private student loans. Therefore, credit card companies would use the time value of money to determine loan payment times and the number that students fear most, the final balance, the future value of the loan. Credit card companies would use the formula for the present value of an annuity to determine the payment schedule and would use the formula for the future value of an annuity to determine how much money the student would end up paying the credit card company in the end of the period. student loan. Insurance companies also use the time value of money. A structured settlement is one example. If a person owes $100,000 payable in $20,000 increments over the next five years, the present value of the transaction is less than $100,000. Therefore, if possible, the person would be better off paying the lump sum now. The same time value of money can be seen in state governments and lotteries. For example, a person wins a lottery worth a million dollars. This person is offered three options and each option has a different fee. The first option is to receive $20,000 per year for the next 50 years. The second option is to immediately receive a lump sum of one million dollars. This option has the highest rate. The third option is to receive half the money now and the other half over the next 25 years. You would use the time value of money to determine the best deal. The time value of money can also be seen with financial service providers of retirement plans.