TVM

If I offer to give you R100

(a) TODAY or
(b) AFTER 12 MONTHS,
on which date would you choose to
receive the R100?

1
 TVM
Receiving R100 TODAY instead after 12
MONTHS is better because:
Money loses its value over time due to
inflation.
R100 TODAY is worth more than R100 AFTER 12
months because the purchasing power of R100
decreases over time as prices of goods rise.

2
 TVM
Receiving R100 TODAY instead after 12
MONTHS is better because:
The R100 can be invested to earn a
return for 12 months.
If you invest it at 8% you then have R108
after 12 months. Therefore you would
rather want to receive the R100 TODAY
to earn your own income on it. 3
 TVM
Receiving R100 TODAY instead after 12
MONTHS is better because:
Another reason: There is a risk that I
can’t give you R100 after 12 months.
R100 TODAY is worth more than R100
AFTER 12 months because you are not
sure that I will still be able to pay R100
after 12 months. 4