Time Value of Money; Assessing the Value of a Starbucks Bond
The concept of the future value of money and the present value of money are useful when assessing potential investments. The future value of an investment is the value that the investor will expect to receive at some point in the future. If an investor is considering purchasing a Starbucks bond which will pay one $2,000 in a year's time, this is the future value of the bond. As investment takes place with the aim of making money and creating value for the investor they would be unwilling to pay $2,000 today for that bond, as this would not result in a profit. Instead, the investor will need to consider the price they are will to pay today in order to receive the $2,000 from Starbucks after a year, allowing for the passage of time. This is an...
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