The Three Factors That Affect the Time Value of Money

question 144

True/False

The three factors that affect the time value of money are principal, number of periods, and the interest rate.

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Definitions:

Internal Rate

Internal rate usually refers to the internal rate of return (IRR), a financial metric used to assess the profitability of investments by calculating the interest rate that makes the net present value (NPV) of all cash flows from a particular project or investment equal to zero.

Accept

In financial terms, it often refers to a bank's agreement to honor a draft or other financial instrument payable at a future date.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess profitability of investments.

Initial Investment

The amount of money used to start a new venture, purchase an asset, or stock in a portfolio, serving as the foundation for future financial performance and returns.