Module 9 Lesson 2 - Inquire & Watch

 

Inquire: Intertemporal Investments I

Interest Rates, Money, and Time

Money received in future periods isn’t counted the same as money received today, because future money is worth less than current money. In other words, the value of money changes over time. The further into the future an income stream is, the less that income is worth today. At a basic level, interest rates are essentially a levy that those who want to acquire money today for consumption pay to acquire those funds. Therefore, interest rates arise as a result of positive time preference (i.e., the tendency to place a higher value on things to be received in the present than on things to be received in the future). Consequently, interest rates help discern how the value of money changes over time. 

Big Question

How does time change the value of money?

 

Watch: Money and Value

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Module 9 Lesson 2 of 4