Michael E. Patrick & Associates

What is TIME VALUE of MONEY?

Money today is worth more than money tomorrow, because it can earn interest. TVM, or the
"Time Value of Money" concept values the amount of time an investor has to wait for an
investment to mature.

Consider this: If someone offered you $100 cash today or $200 cash in 30 years, what would you choose?
Most people would take the $100 today because we know that $100 today can buy more than $200 way out
in the future. But what if someone offered $100 cash today, or $200 cash TOMORROW? You might be
willing to wait a day for the money. What changed? TIME! You didn't have to wait as long for the $200.
Since the note buyer must wait to get their money, they "discount" the note and pay less to you now.
Because tomorrow's dollars are worth less than today's dollars, you receive less than the full amount due
on the note, but you receive the money due to you now instead of having to wait years to get it.

Just be aware of the way time affects the value of money, and that it interacts with the note interest
rate, and an investor’s desired return. All of these factors play an important role in how much
you will receive for the note you're looking to sell. Don't expect to get full face value for your
note, because any investor that buys it will have to wait a period of time to get all of those
dollars. If you want your money now instead of waiting for it, you'll receive less, but you can be sure
that we will do everything possible to get you the most for your note as quickly as possible.

Phone: 505.715.8571
Fax: 505-896-7863. E-Mail: mail@mikepatrick.net