BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -How Does the Time Value of Money Relate to Opportunity Cost? Opportunity cost is key to the concept of the time value of money. Money can grow only if it is invested over time and earns a positive return. Money that is not invested loses value over time.

Detailed explanation-2: -Opportunity cost is the possible benefit that a person loses when choosing one option over the other. For example, if you buy a car, you may miss out on the opportunity to pay for a new condo’s down payment. The time value of money is important because it can help you make decisions about how to best use your money.

Detailed explanation-3: -Opportunity cost refers to what you have to give up to buy what you want in terms of other goods or services. When economists use the word “cost, ” we usually mean opportunity cost. The word “cost” is commonly used in daily speech or in the news.

Detailed explanation-4: -Money has time value. In simpler terms, the value of a certain amount of money today is more valuable than its value tomorrow. It is not because of the uncertainty involved with time but purely on account of timing. The difference in the value of money today and tomorrow is referred to as the time value of money.

Detailed explanation-5: -When making financial decisions based on the time value of money, you might also consider opportunity costs. If you have multiple options to choose from when making a decision, the opportunity cost refers to the potential gains you will not receive because you chose one option over the others.