Why is the money given time value
Why is the money given time value?
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a) Positive interest rates show that the money has time value. If one person lets another person borrows money, the first will person need the compensation in exchange for dropping current consumption. b) The individual who has borrowed the money is ready to pay the increase current consumption. The return rate which is required for an investment shows the pure time value of money, any risk premiums present and an adjustment for expected inflation.
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Presently, the spot exchange rate is $1.50/£ and the three-month forward exchange rate is $1.52/£. The interest rate of three month is equal to 8.0% per annum in the U.S. & 5.8% per annum in the U.K. One can borrow as much as $1,500,000 o
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