Please kindly answer if it's true or false: 1) Since individuals are always confronted with opportunities to earn positive rates of return on their funds, the timing of cash flows does not have any significant economic consequences. 2) Time-value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today. 3) Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time. 4) For a given positive interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value. 5) The greater the interest rate and the longer the period of time, the higher the present value.

Please kindly answer if it's true or false: 1) Since individuals are always confronted with opportunities to earn positive rates of return on their funds, the timing of cash flows does not have any significant economic consequences. 2) Time-value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today. 3) Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time. 4) For a given positive interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value. 5) The greater the interest rate and the longer the period of time, the higher the present value.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter4: Managing Your Cash And Savings

Section: Chapter Questions

Problem 9FPE

See similar textbooks

Related questions

Q: Which of the following is the correct definition for present value (PV)?

A: Present value is an important concept in finance which is based on the concept of time value of…

Q: A higher level of wealth causes the demand for loanable funds to increase and interest rates to fall…

A: False.

Q: Classify the type of financial formula for the information given. Lump-Sum Problems P A known…

A: The investors are estimating the return and maturity value before making investment in any security.…

Q: Eric wants to invest in government securities that promise to pay $1,000 at maturity. The…

A: 1) Present value (PV) is the current value of a future sum of money or stream of cash flows given a…

Q: Which of the following is/are correct? Select all that apply. More frequent compounding reduces the…

A: The compounding rate is the rate at which the interest has calculated and at the time of…

Q: Finance The time value of money refers to: a) Factors that show future value b) Factors that…

A: Time Value of Money refers to the concept that the sum of money that is in hand today will not worth…

Q: ow do you think today's low interest rate environment is impacting the time value of money? How…

A: Time Value of Money: It refers to the concept which tells the value of money is worth more than in…

Q: A graph of the discounting process shows how the present value of any sum to be received in the…

A: Present value = Future value / (1+rate)^years

Q: 2. Present value Aa Aa Finding a present value is the reverse of finding a future value. Which of…

A: Present Value is a value of today for all the cashflows generated in the future period of time. The…

Question

Please kindly answer if it's true or false:

1) Since individuals are always confronted with opportunities to earn positive rates of return on their funds, the timing of cash flows does not have any significant economic consequences.

2) Time-value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today.

3) Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time.

4) For a given positive interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value.

5) The greater the interest rate and the longer the period of time, the higher the present value.

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step 7

Trending now

This is a popular solution!

Step by step

Solved in 7 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

1) Which of the following statements about time value of money is not correct? Present value of money is today's value of money. Money grows with interest and time. Value of $1 today is greater than tomorrow. Value of $1 today is less than tomorrow. 2) The present value of a lump sum is: today's value of expected cost savings in the future. today's value of a total future cash flow. today's value of multiple equal payments in the future. today's value of a single payment in the future. 3) ACE Company acquired $500,000 to construct a new warehouse. To obtain this fund, the company issued 3,000 preferred stocks with $100 par value and 8% dividend rate for $300,000 and bonds for $100,000 with 5% interest, and borrowed the rest from its bank with 6% interest rate. The company requires a 3% buffer margin. What is the required rate of return on this project? 7% 12% 10% 13.9% 10.9%
Anyone?!?!
A financial analyst is treating a cash flow stream as a perpetuity. The present value of the perpetuity will __________ (increase, decrease, or not change) if the interest rate increases, and will ___________ (increase, decrease, or not change) if the growth rate increases.
2. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The interest rate (I) that could be earned by deposited funds The trend between the present and future values of an investment The duration of the deposit (N) The present value (PV) of the amount deposited All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 9%, or 17%. Identify the interest rate that corresponds…
2) Which of the following statements is INCORRECT based on the time value of money? A) In general, money today is worth more than money in one year. B) We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period. C) We refer to (1-r) as the interest rate factor for risk-free cash flows. D) For most financial decisions, costs and benefits occur at different points in time.
A dollar today is worth more than a dollar to be received in the future. The difference between the presentvalue of cash flows and their future value represents the time value of money. Interest is the rent paid forthe use of money over time.
Consider a company with a Reddington Immune cash flow stream of assets and liabilities. The asset payments all occur before the liability payments. What can you say about the present value of the entire cash flow stream if the interest rate increases from its current rate? Select one: The new present value is negative. b. We cannot say anything about the sign of the new present value. The new present value is zero. d. The new present value is positive. a. C.
If you are compounding a cash flow, you are ________. A: Finding a future value B: Finding a present value C: Multiplying a future cash flow by the number of years it is from the present D: None of the abov
3. Present value Finding a present value is the reverse of finding a future value. Which of the following is true about finding the present value of cash flows? Finding the present value of cash flows tells you how much you need to invest today so that it grows to a given future amount at a specified rate of return. Finding the present value of cash flows tells you what a cash flow will be worth in future years at a specified rate of return. Which of the following investments that pay will $18,500 in 8 years will have a higher price today? The security that earns an interest rate of 8.50%. The security that earns an interest rate of 12.75%. Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 13.80%. Assuming that both investments have equal risk and Eric’s investment time horizon is flexible, which of the following investment options will…
Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?A. InterestB. Inflation C. Risk of failure to receive expected cash inflows D. Historic cost
The amount of time needed to recoup one's initial investment is referred to as the payback period, and it is also the amount of time required for an investor to reach the point when they are no longer losing money. Investments with shorter payback periods are considered more desirable, whereas those with longer payback periods are seen as less desirable. Imagine that you are the Chief Financial Officer. Critically evaluate the use of cash payback method (advantages and disadvantgaes) in determining the investment decisions with sufficient cash flow to ensure business sustainability in a competitive environment.
Finance The time value of money refers to: a) Factors that show future value b) Factors that show past value c) Concept that a dollar received today is worth more than a dollar received in the future d) Concept that a dollar received today is worth less than a dollar received in the future explain in detail