Defining the principle of the time value of money:
What if a close friend asks today to borrow 1,000EUR with the precondition to repay the exact same amount in five years? Would you take the deal or not?
Let’s imagine a CEO or one of the beneficial owners of a profit making, credit institution with thousands of clients wishing to borrow different amounts of the institution’s money at identical terms as the first scenario, borrowing today and repaying the same amount in five years.