Which of the Following Statements About the Time Value of Money

question 11

Multiple Choice

Which of the following statements about the time value of money concept is true ?

• A) A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation.
• B) A dollar received today is worth less than a dollar to be received in the future because future dollars are not affected by inflation.
• C) A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return.
• D) A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it.

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Definitions:

Dollar-Value LIFO

Dollar-Value LIFO method is an inventory costing method that uses the LIFO principle coupled with grouping inventory into pools based on dollar value instead of physical units.

Base Year Cost

The initial cost of an asset or investment, used as a reference point to measure the cost growth or performance over time.

Price Index

A statistical measure that shows changes in the price level of a basket of consumer goods and services over time, used to gauge inflation or deflation.

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out (LIFO) principle, but accounts for changes in inventory value due to inflation by measuring inventory in dollar amounts rather than units.