The Time Value of Money (TMV) is based on the concept that a dollar today is worth more than is would be tomorrow. Time Value of Money is a very important principle of finance. It is the process of calculating the value of an asset in the past, present or future. The purpose of this paper is to explain how annuities affect TVM problems and investment outcomes. This paper will specifically address the TVM impact on interest rates and compounding, present value, future value, opportunity cost and annuities and the rule of 72. Interest Rates and Compounding Interest Rate is defined by InvestorWords.com as, ¡§A rate, which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and the Federal Reserve policies (2007, Para 1).¡¨ Compounding Interest is a process of earning interest on interest. For example if a person invest 20 dollars for 10 years at a rate of 10 percent and do not ......

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