The Time Value of Money and the Attached Components (Essay Sample)

Time value of Money
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Question 1
Selecting the best superannuation plan is key to ensuring a sustained financial being after retirement. Employees are exposed to choosing between the Defined Benefit Plan and the Investment Choice Plan, two pension plans both focused on reducing the social care costs. In this case, tertiary employees are ought to consider certain factors in choosing their preferred superannuation plans. Among these factors include the costs or charges included in the plan that is the employee should opt for the most profitable plan with lower charges as this shall assure higher returns from the superannuation plans CITATION Boo06 \l 1033 (Boot & Thakor, 2006). Time and the risks involved are also critical factors to consider in choosing between Defined Benefit Plan or the Investment Choice Plan as higher risks compromise the value of the final pension payout as time affects the value of money since majority shall prefer shorter periods for the higher value of money. In this case, shorter plans shall mean higher risks, a reflection of higher returns since the money today is more value than money tomorrow CITATION Bob04 \l 1033 (Ryan, 2012).
Question 2
The time value of money is a prominent concept in the superannuation plan. The value of the investments in the future is highly pegged on the aspect of the time value of money with the focus on attaining higher return. Preceding the instances of spending, the employees though mandated by the federal statutes, they tend to invest part of their earnings in the pension plans with the focus of receiving return compensations for the foregone spending CITATION Wil13 \l 1033 (Wild, KenShaw, & Chiapetta, 2013). The time value of money is largely dependent on the period is taken by the investments to remain in the banks this helps in distinguishing their well-performing investment from poor performing products. The time value of money thus encourages more investing as the employees strive to venture into both Plans with the focus on making substantive profits CITATION Boo06 \l 1033 (Boot & Thakor, 2006).
In this case, employees hold that money today has more value as one can easily invest it in a pension plan and earn more to graph e or returns from it compared to the money that is defined and is planned to come in the future CITATION Bob04 \l 1033 (Ryan, 2012). Employees who invest in the defined benefit plan, therefore, stand out in preceding the returns and revenue from the money they earn today by investing in the long-term investment funds which are directed onto the long run investments such as the government bonds, stable funds or the protected bonds that are exposed to in their investment. On the other hand having a full decision to choose where to pension investments are to be placed allowing a person to make shorter but riskier decisions that shall increase the value of money ears CITATION Wil13 \l 1033 (Wild, KenShaw, & Chiapetta, 2013).
Question 3
Basing on the fact that money today is more worthy than the money tomorrow, the tertiary employees shall consider investing in the investment options that provide regular returns to provide value for money and avail money for other investments receiving earnings at an earlier time than waiting for longer periods to receive less worth cash. From the investment options provided by UniSuper Ltd, indexed pensions stand out as the best option for investment as they provide cash earnings regularly as they are short term and highly subjected to ...