The time value of money is an important component of the rent one pays for using someone else's financial capital.

Question

Quizplus · Accepted Answer

The time value of money refers to the fact that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. Therefore, when someone rents or borrows financial capital from someone else, they must pay a fee that compensates the lender for the time value of money they are giving up. This fee is a component of the rent or interest rate paid on the borrowed capital.

The Time Value of Money Is an Important Component of the Rent