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. (D)</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. (D)</p> Signup and view all the answers