Time Value of Money
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A dollar in hand today is worth more than a dollar promised at some future time. For example,
which would you rather have $10,000 today or $10,000 in 5 years? Obviously, 10,000 today.
Money received sooner rather than later allows one to use the funds for investment purposes.
This concept is referred to as the Time Value of Money.
The calculations are based on the following assumptions:
- Equity return is based on Ibbotson Assoc. Large Company Stocks 77 year average of 10.2%.
- Fixed Income return is based on the Ibbotson Assoc. Intermediate-Term Government Bonds
77 year average of 5.4%
- $10,000 invested initially
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