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Present and Future Value Quiz

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Questions and Answers

Present value is the value of a sum of money in the future, discounted to the present.

True

Future value is the value of a sum of money at a specified date in the future.

True

Present value is the value of a sum of money at a specified date in the future.

False

What is compound interest?

Interest calculated on the initial principal and also on the accumulated interest from previous periods Signup and view all the answers

What is simple interest?

Interest calculated only on the initial principal Signup and view all the answers

How does compound interest differ from simple interest?

Compound interest takes into account the accumulated interest from previous periods, while simple interest does not Signup and view all the answers

Study Notes

Time Value of Money

Present value is the current value of a future sum of money, calculated by discounting the future amount.
Future value is the value of a sum of money at a specified date in the future.

Types of Interest

Compound interest is the interest calculated on both the principal amount and any accrued interest.
Simple interest is the interest calculated only on the principal amount.

Comparison of Compound and Simple Interest

The key difference between compound and simple interest is that compound interest takes into account accrued interest, while simple interest does not.

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Description

Test your knowledge of present and future value with this quiz. Explore the concepts of present value, future value, and the calculations involved in evaluating the worth of money over time.