Concepts related to Issues relating to the time value of money that may be important in the decision making of the investment and superannuation INvestment Plan
The time value of money related issue are
- Cost of the funds- As stated by Wahyudin, Solikhah and (2017), the cost of funds is the issues regarding the standard cost, opportunity cost and the concepts of variance. Such costs are the cost of investing in a particular type of plan. As the time value of money is invested for a particular time, there are certain costs, which are taken into account. These play a vital role in the decision making of the investment.
- Rate of inflation- The rate of the inflation is one of the most important issues. The inflation can be a burden on the rate of the growth of a particular sum of money for a certain period. In order to make the money grow in real sense, when the time value of money is considered the money should not be affected by the inflation. For example: An amount of money kept for 5 years at 8% p.a will give some return but if the inflation rate is 9% then the growth of the money has no value.
- Stability of the economy- The economy should be stable enough so that the employees are able to get the benefit from their investment. At times there are certain events that makes the economy unstable such as the natural disasters and the other calamities as per our financial accounting homework help experts. As stated by Ramiah, Zhao, and Moosa, (2014), the government of the country will have to decrease the rate of returns on the investments, as the government has to incur huge amount of expenses on the affected people. This is an issue related to the time value of money.
The superannuation fund provided to the employees of the tertiary sector increases their security. As commented by Clarke 2017, certain decisions need to be taken to invest the funds of the employees. There are different plans for the investment of such funds. These plans provide certain strategy to invest the funds in a strategic way to utilise the benefit or the outcome of the investment. There is a type of the defined benefit plan, which is a type of the retirement plan as found by our online exam help researchers. The company should adopt a type of financial management in order to execute the plan. As stated by Wahyudin and Solikhah and (2017), this plan has certain amount of restrictions. The restriction of the plan is that there are some statutory limits on the withdrawal of the money from the fund.
This fund permits a certain number and amount of transactions beyond which the investor would have to pay the penalty. There is also another type of the plan that determines the strategy to invest the money in the accumulation fund of the employee. This is similar to the defined benefit plan but it has certain amount of the flexibility. The investment choice plans have lesser limits off withdrawal but there are certain legal formalities and the procedures that are to be followed by the employer as well, as the employee. As stated by Zhao and Moosa (2017), the option has the benefit as the employee is able to take certain amount of the loan in deciding about the investment in the funds. The fund has less amount of penalty as the employees are able to withdraw a greater number of time as compared to the defined choice plan. This has wide range of the plans which are placed in it. The invest plans have greater options for investment.