The Idea That Money Has "Time Value" Refers to the Fact

question 130

Multiple Choice

The idea that money has "time value" refers to the fact that

• A)people prefer to receive a given sum of money in the future rather than in the present.
• B)money can be used to purchase the services of labor, as measured in hourly units.
• C)a specific amount of money is more valuable to a person the sooner it is received.
• D)compound interest converts future dollars into a greater amount of current dollars.

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Definitions:

Present Value

Today's value of a future financial amount or series of cash disbursements, based on an agreed-upon rate of return.

Discount Rate

The discount rate applied to project the present value of future cash flows from a financial instrument.

Invest

Committing financial resources with the hope of income or profit generation.