Valuing Money

Include: Value of Money;Valuing Bonds; Valuing Stocks; Net Present Value.
Also include two peer reviews and biblical based.

Bible has directly and indirectly talked about wealth, money, and its value. Money in the present time has more value than the money in the future time. The prevailing interest rate gives the difference in value. The rate determines the amount of returns that the money in the future would produce if invested in an alternative option. Bible expressly discourages charging interest to one another in Exodus 22:25 and Deuteronomy 23:19. In order to get the present value of the future money, a lump sum amount is discounted using the prevailing interest rate (McGraw, Shafer & Todorov, 2010). The interest rate takes into consideration the economic performance and future uncertainties. Bonds are valued by taking into consideration their maturity value and the expected cash flow in the future (Brealey, Myers & Marcus, 2012). When valuing the bonds, the maturity lump sum value is discounted using the prevailing interest rate for the bond period. The discounted amount is then added to the discounted value expected future cash flows. The total value gives the price of the bond.

Proverbs 13:11 states that gathering money little by little will make it grow. On the same note, value of bond and money is taken as future cash flow’s present value. The net present value is taken as the present value of all the future flows. The cash flow includes both the cash inflows and the cash outflows. The stocks are valued using the same concept of discounting the future value. Dividends are compounded using the discount rate that is adjusted for risk. The value is added to the company’s earnings which are multiplied with the constant growth rate of the company’s share and discounted with the risk-adjusted rate of the…………………

Brealey, R., Myers, S. & Marcus, A. (2012). Fundamentals of corporate finance. New York: McGraw-Hill/Irwin.

Davidson, P. (2012). Money and the real world. The Economic Journal 3(7), 101-115.

McGraw, A. P., Shafir, E., & Todorov, A. (2010). Valuing money and things: Why a 20 item can be worth more and less than 20. Management Science 56(5), 816-830.