Abstract The initial steps on the way to understanding the connection between the value of dollars today and that of dollars in the future is by looking at how funds invested will grow over time. This understanding will allow a person to answer such questions as; How much should be invested today to produce a specified future sum of money? TIME VALUE OF MONEY Generally, borrowing money is not free, unless it is a small amount for lunch from a friend. Interest is the cost of borrowing money. An interest rate is the cost stated as a percent of the amount borrowed per a period of time, usually one year. The current market rates are composed of three items. The Real Rate of Interest is what compensates lenders for postponing their own spending throughout the tenure of the loan. An Inflation Premium is added to offset the chance that inflation may gobble into the value of the money throughout the tenure of the loan. Additionally, a variety of Risk Premiums are added to compensate the lender for risky loans such as unsecured loans made to borrowers with questionable credit ratings or ......

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