The Process of Converting an Amount Given at the Present

question 34

Multiple Choice

The process of converting an amount given at the present time into a future value is called:

• A) time value of money.
• B) discounting.
• C) compounding.
• D) None of the above.

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Definitions:

Payback

The period of time required for the return on an investment to "repay" the sum of the original investment.

Time Value of Money

The theory that current money holds more value than equal amounts in the future because of the earnings it could potentially produce.

Specified Point in Time

Refers to a particular moment or exact date that is identified for an event or action to occur.

Payback Period

The period of time required for the return on an investment to "pay back" the sum of the original investment.