A Sum of Money Promised You at a Time in the Future

question 139

True/False

A sum of money promised you at a time in the future is worth only as much as you would have to put in a bank today to have that sum available at that point in time.

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for loans or the current price of a commodity, security, or currency.

Time to Maturity

The remaining period until a financial instrument, such as a bond, reaches its due date and the principal must be repaid.

Annuities Due

Annuities Due refer to a series of equal payments made at the beginning of consecutive periods over a fixed length of time, often used in finance to represent contracts that require such payments.

Ordinary Annuities

Ordinary annuities are a series of equal payments made at the end of consecutive periods over a fixed length of time.