Time Value of Money (TVM) FAQs What is Time Value of Money (TVM)? Time Value of Money (TVM) is a concept in financial mathematics that suggests money available at present is worth more than an equal amount in the future due to its potential earning capacity. How does TVM calculate? TVM calculations typically involve using an interest rate and determining the value of money today, known as the present value, or calculating the future value of funds given a certain rate of return over time. How is TVM used? TVM can be used for various purposes such as calculating loan payments, determining investment returns, evaluating stock options, and measuring other financial outcomes over time. What are the components of TVM? The key components of TVM include present value, future value, interest rate, and number of periods. What is compounding in TVM? Compounding refers to earning interest on previously earned interest which can increase the total return on investment over time. It is a way to accelerate the power of money over time with compounding helping to maximize returns as much as possible. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.