Which of the Following Statements Best Illustrates the Time-Value of Money

question 75

Multiple Choice

Which of the following statements best illustrates the time-value of money concept?

• A) Bob is willing to forgo receiving $100 today in order to receive $110 next month.
• B) Tom is indifferent between receiving $50 now and receiving $50 six months from now.
• C) Terry works for an hourly wage instead of a fixed salary.
• D) Jeff would prefer to receive $200 at the end of the year instead of $220 now.

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Definitions:

Current Assets

Items that are likely to be cashed in, sold, or expended within the span of one year or the standard operational period of the business.

Equipment

Tangible property owned by a business that is used in its operations to generate income, such as machinery or tools.

Contributed Capital

Funds raised by a company through the issuance of shares to investors, reflecting the equity capital contributed by shareholders.

Total Assets

The sum of all assets (current and non-current) owned by a business.