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Technical Note

Educator Copy

Monetary Value of Time: Understanding Compounding and Real Changes

Saad Azmat


INDUSTRY :

AREA : Finance

ORGANIZATION : Vineyard Farms

LENGTH : 7

LUMS No : 02-610-2015-2

PUBLICATION YEAR : 2015

DESCRIPTION

KEYWORDS:

Monetary Value of Time,Compounding & Real Changes,Mental Accounting,Linear Change,Consistency,Financial Institutions,Real & Nominal Changes,Inflation,Conclusion


DESCRIPTION:

This article discusses some of the limits of the mental accounting process. Primarily, the focus is on the power of compounding and our inability to comprehend it mentally. The article also examines our bias for nominal as opposed to real changes. Given these human limitations, a thorough understanding of financial planning tools and models becomes significant for effective financial decision making.


LEARNING OBJECTIVES:


SUBJECTS COVERED:

Finance