Time Value of Money Concepts

Compound interest is only applicable to short-term loans, while simple interest is used for long-term investments.

Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal amount and also on the accumulated interest. (correct)

Simple interest is calculated more frequently than compound interest.

Simple interest leads to higher returns compared to compound interest over a longer period of time.

The value of an asset at a specific point in the future.

The future value of an investment, taking into account compounding over time.

The total value of all future payments in an annuity.

The current value of a future sum of money, discounted to reflect its current worth. (correct)

Leasing, Capital expenditure, and Valuation of Bond. (correct)

Real estate investments and stock trading.

Short-term loans and credit card payments.

Savings accounts and fixed deposits.

<p>The true annual interest rate earned or paid on an investment or loan.</p> Signup and view all the answers

<p>Funds set aside to repay a debt or replace an asset at the end of its service life.</p> Signup and view all the answers