Academic literature on the topic 'Time value of money'

The development of the Islamic finance theory today has become a hot issuediscussed, such as polemic of the concept of time value of money. This concept cored that money today is more valuable than the same amount of money in the future, so that the grounding or assumptions used by this theory is al ghunmu bila ghurmin (get results regardless of risk) and al kharaj bila dhaman (get results without issuing a charge), and it’s contrary to the principles of Islam. Then The positive time preference concept was replaced with the concept of economic value of time, this concept cored that time has economic value, not money has a time value

In this paper, we investigate how individuals make time–money tradeoffs in labor contexts in which they are either asked to work to earn money or to pay money to avoid work. Theory predicts that exchange rates between time and money are invariant to the elicitation method. Results from our experiments, however, show otherwise, highlighting inconsistencies in how individuals consider their time. In the first two experiments, participants work to earn money, and we compare two incentivized elicitation methods. In the first, “Fixed-Time mode,” we fix the amount of time participants need to work and elicit the minimum dollar amount they require to do the job. In the second, “Fixed-Money mode,” we fix the amount of money we pay participants and ask for the maximum amount of time they are willing to work for that pay. We similarly vary elicitation procedures in Experiment 3 for paying money to avoid work. Translating the results into pay per hour, we find that in Fixed-Time mode, valuation of time is stable across durations, based on an analytical approach. By contrast, in Fixed-Money mode, participants increase their pay-per-hour demand when the amount of money increases, indicating a less calculated and more emotional view of time. Our results demonstrate that individuals’ value of their time of labor can be fluid and dependent on the compensation structure. Our findings have implications for theories of time valuation in the labor market.

The development of Islamic financial theory today has become an important issue, such as debate over the concept of time value of money. This study aims to find out, first, the concept of money in conventional and Islamic financial systems; second, the basic concept of time value of money; and third, the concept of Economic value of time. The research method used in this study is a qualitative method. The results showed that in the conventional financial system, money is considered like a commodity as well as goods and services that can be traded, sold and bought and can be used as objects to speculate, whereas in Islam, money is seen as something that should not be hoarded and should not be wasted or dissipated, money is not seen as a tradable commodity and Islam sees money as a means of exchange and has no value in itself; The concept of time value of money states that the current money utility is higher compared to its utility for the same amount of money in the future; the concept of economic value of time emphasizes that time has economic value rather than money which has time value.
 Keywords: Time Value of Money; Economic Value of Time; Money; Islam; Conventional
 
 Abstrak
 Perkembangan teori keuangan Islam dewasa ini telah menjadi masalah yang hangat diperbincangkan, seperti perdebatan mengenai konsep time value of money. Penelitian ini bertujuan untuk mengetahui, pertama, konsep tentang uang dalam sistem keuangan konvensional dan Islam; kedua, konsep dasar time value of money; dan ketiga, konsep Economic value of time. Metode penelitian yang digunakan dalam penelitian ini adalah metode kualitatif. Hasil penelitian menunjukkan bahwa dalam sistem keuangan konvensional, uang dianggap seperti komoditas seperti halnya barang dan jasa yang dapat diperdagangkan, dijual serta dibeli dan dapat dijadikan objek untuk berspekulasi, sedangkan dalam Islam, uang dipandang sebagai sesuatu yang tidak boleh ditimbun dan tidak boleh disia-siakan atau dihamburkan, uang tidak dipandang sebagai suatu komoditas yang dapat diperdagangkan dan Islam memandang uang sebagai alat pertukaran dan tidak memiliki nilai dalam dirinya sendiri; Konsep time value of money menyatakan bahwa utilitas uang saat ini lebih tinggi dibandingkan dengan utulitasnya untuk uang dengan jumlah yang sama di waktu yang akan datang; konsep economic value of time menekankan bahwa waktulah yang memiliki nilai ekonomi bukan uang yang memiliki nilai waktu.
 Kata Kunci:Time Value of Money; Economic Value of Time; Uang; Islam; Konvensional.

The objective of this paper is to demonstrate how to use bond valuation to teach students how to use a financial calculator. In this paper, a single bond issuance is examined using three different yields to maturity (i.e. market rates). The present values of a $1000 bond issue, valued with five years to maturity and a ten percent coupon rate, are determined using three different yields to maturity: 8% (which would result in a premium), 10% (which would result in neither a discount nor a premium), and 12% (which would result in a discount). The present value of the bond is determined by calculating the present values of both the coupon payment stream (an annuity) and the maturity value (present value of a lump sum) given three different situations. All three values are determined for each year as the time to maturity decreases. A discount (premium) from a change in the YTM is reduced each year until maturity. The results are shown in tables and graphed in Figure 2.

This article reveals the Islamic view of the concept of Time Value of Money (referred by economists as positive time preference). This concept states that the value of commodities at present is higher than in the future. Time Value of Money is closely linked to the ‘discount’ concept that exists in capital and investment theory and, in practice, is used as a tool for project evaluation as well as investment decisions. This study concludes that Islam is not familiar with the concept of Time value of money. Islam only recognizes the concept of economic value of time. In Islamic view, money is simply a means of exchange, not a commodity. Similarly, the motive for money demand is to meet the needs of transaction, not for speculation.