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…

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

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What happens to the present value of some fixed dollar amount to be received in the future as time to the money decrease? Why?
Anyone?!?!
10. The time value of money concept states that money in the future is worth more than money in the present. True or False
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 four time-value-of-money variables. Which of the following is not one of these variables? O The present value (PV) of the amount invested O The inflation rate indicating the change in average prices O The duration of the investment (N) O The interest rate (I) that could be earned by invested funds This process requires knowledge of the values of three of 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%, 8%, or 16%. Identify the interest rate that corresponds with each line.
Which of the following statements about the time value of money is true? a.) A dollar in hand today is worth less than a dollar to be received in the future. b. ) The value of a dollar invested at a positive interest rate decreases over time. c.) The further in the future you receive a dollar, the less it is worth today. d.)The higher the rate of interest, the more likely an investor will elect to consume at present and forgo invest his funds.
The time value of money takes all of the following into consideration EXCEPT a.Inflation b.the number of compounding periods per year c.The total number of years d. the present value of money
Why is a dollar today worth less than a dollar sometime in the future?
What effect do interest rates have on the calculation of future and present value? How does the length of time affect future and present value? How do these two factors correlate?
The present value represents the amount of money you would have to deposit today in order to match what you would get from the income stream at the future date. The formula is Time = M = i Future value represents the total amount of money you would have if you deposit the income stream until a future date. The formula is To start our problem we need to identify the variables. Rate =r= i Income Stream S(t) = i Present Value = years % M 1. 0 S (t) et dt. Future Value = Present Value* erM dollars/year
1. Reflect, analyze and explain the phrase: "a dollar today is worth more than a dollar tomorrow."
The time value of money is a financial concept that focuses on the idea that a dollar today will be worth more in the future. There are two key time value concepts: present value and future value. Looking at future value, the concept is that an amount in hand today will grow if it earns a specific rate of interest over a given period of time. This growth in value occurs not just because of the rate of interest being earned each year but also because that earned interest compounds. In other words, the interest earned in year one is added to the principal in year two, and interest is earned on this new principal balance; this continues through the set period of time. Work through the following scenario to understand future value and the concept of compounding interest. You have an eccentric aunt who has promised to deposit $7,125 in a savings account in your name. She has stated that you will not have access to the money for three years but that the money will be earning 7% interest. At…
How does one determine the value of any asset whose value is based on expected future cash flows?

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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