Which of the following represents the time value of money concept?a) Money today is worth more than the same amount in the futureb) Money in the future is worth more than the same amount todayc) Money's value does not change over timed) Money is only valuable when invested in stocks

Explanation of Time Value of Money:The time value of money (TVM) is a financial concept that…

Answered: Which of the following represents the…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

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Future value refers to the worth today of some amount of money received in the future. O True False
In finance, what do we mean by the time value of money? How do we calculate it?*
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…
Is the value of money affected by time, and if it is, in which direction? O a. It is not affected O b. It depends O C. It is affected, the present value of money decreases the bigger the time horizon is O d. It is affected, the present value of money increases the bigger the time horizon is
4. 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? O 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. O 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 $5,000 in 12 years will have a higher price today? O The security that earns an interest rate of 8.25%. O The security that earns an interest rate of 5.50%. 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 exhibit the lower price? O An investment…
. Rational investors prefer to receive money today rather than the same amount of money in the future. Why is the consideration of time is important in financial decision making, how can time value be adjusted. Explain in Detail.
The value of money increases with time. A. true B. false
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
What are three reasons that cash is worth more today than cash to be received in the future?
The future value is the same concept as the way money grows in a bank account. True or false?
How does the time value of money impact investment decisions, and why is it important for both individuals and businesses to consider it when making financial decisions? Discuss the concepts of present value and future value, and explain how they are calculated. How do interest rates affect these calculations? What is the difference between simple interest and compound interest, and how does this difference influence long-term investments? Why do higher interest rates typically decrease the present value of future cash flows? Explain the role of discounting in determining the present value of future cash inflows. How do businesses use the net present value (NPV) method to assess the profitability of projects? What are some limitations of relying solely on NPV for decision- making? How does the internal rate of return (IRR) complement the NPV method? Why is it important to account for risk and uncertainty in time value of money calculations? Lastly, how can inflation erode the real…
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.

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Which of the following represents the time value of money concept? a) Money today is worth more than the same amount in the future b) Money in the future is worth more than the same amount today c) Money's value does not change over time d) Money is only valuable when invested in stocks