Understanding the Importance of Time Value of Money and How It Impacts You
One of the most powerful concepts of learning about investing is to understand and utilize the power of compound investing. By applying compound investing, an investor is able to earn more without working longer or harder. If this concept is not applied, the individual saving for retirement who lives paycheck to paycheck will miss out on “having their money work for them”. The concept is simple, but not easy to calculate: money which is consistently reinvested will bring exponential rewards to the investor. This article attempts to shed light on the importance of understanding compound investing and bring forth distinctions to help the finance student gain an edge whenever encountering definitional or quantitative finance problems in this topic. It is critical to mention that there are two types of interest: simple interest and compound interest. Simple interest is solved by finding the product of the principal , rate , and time ....
