Time Value of Money The time value of money is the foundation of finance. The fact that a dollar today will be worth more than a dollar tomorrow is the basis for investment and business growth. The future value of a dollar is based on the current dollar amount, the interest rate, and the time period involved. Financial calculators and tables can help calculate future and present values, which eases the pain of those with mathematical difficulties. You can also calculate the yield or rate of return. A financial application of the time value of money is the purchase or sale of a home mortgage loan. Although normally managed by financial institutions, individuals can use it as an investment opportunity. The first step is to calculate the current value of the note. A certified mortgage appraiser determines the current value of a mortgage note. The note is calculated by calculating the present value using several factors including the interest rate, liquidity, collateral and degree of security (Groom, 2006). Determine future value, which Block and Hirt (2005) describe as “…the value of an amount that can grow at a given interest rate over a period of time.” (p.35) is more complicated than calculating the value of bonds, but follows the same principles. It depends on financial factors such as market fluctuations, economic growth patterns, inflation and interest rate. Bond rates are guaranteed, so they are low risk but also carry a low return. The future value of the property is riskier, but also has the potential for higher returns. Another application of the time value of money is car lending. A favorite ploy of car dealers is to push a sale on the basis that the buyer will have the "same payment" but a new... middle of paper... helpful tips to know before buying or selling a known in today's real estate market. Buzzle.com. Retrieved February 20, 2007, from http://www.buzzle.com/editorials/6-4-2006-98253.aspHenderson, D. (2002). Utility-price. The concise encyclopedia of economics. Retrieved February 20, 2007, from http://www.econlib.org/LIBRARY/Enc/OpportunityCost.htmlKantrowicz, M.(2007). FinAid website, the student's intelligent guide to financial aid. Retrieved February 21, 2007, from http://www.finaid.org/loans/npv.phtmlPeterson, S. (2005, March 1). How to make a good capital decision. ISA Intech. Retrieved February 21, 2007, from http://www.isa.org/InTechTemplate.cfm?Section=InTech&template=/ContentManagement/ContentDisplay.cfm&ContentID=42561University of Phoenix.(Ed.). (2005). Fundamentals of Financial Management, 11e [University Phoenix Custom Edition]. The McGraw-Hill Companies.