The Principle of the Time Value of Money Basically Says

question 95

Multiple Choice

The principle of the time value of money basically says that ________.

• A)because firms pay managers a great deal,managers need to use their time very effectively
• B)money received today is more valuable than money received in the future because money in the future is more risky
• C)money received today is more valuable than money received in the future because firms and individuals can invest money they have today and earn a return on that money
• D)because of the principal-agent problem,investors cannot trust that money firms promise to pay in the future will ever arrive

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Definitions:

Imperfect Information

A situation in which all parties in a transaction do not have equal access to relevant information, leading to inefficiencies in the market.

Market Failure

A situation in which a market left on its own fails to allocate resources efficiently, often justifying government intervention.

Nutrition Labeling

Information provided on food packaging that details the nutrient content, such as calories, fats, vitamins, and minerals.

Externality

An economic term referring to a cost or benefit that affects a party who did not choose to incur that cost or benefit, often leading to market failure.