Time Value of Money Quiz

Time Value of Money

• The core principle of finance related to the time value of money is that a unit of money received today is worth more than the same unit received in the future.
• Money available at the present time is considered to be worth more than the same amount in the future because it can be invested to earn interest or returns.
• A rational person would prefer to receive money today rather than the same amount in the future because of its potential earning capacity.
• The concept that determines the future value of money is the potential earnings or returns it can generate over time.
• The concept that determines the present value of money is the discounting of future cash flows to their equivalent value in the present.
• The concept of time value of money recognizes that a unit of money received today is worth more than the same unit received in the future due to its potential earning capacity.
• Immediate receipt of money is preferred in the time value of money concept because it provides the opportunity to invest and earn returns.
• Rs.1,000 today is preferred over Rs.1,000 ten years from today because it can be invested and earn interest or returns over the ten-year period.
• The potential earning capacity of money is the core principle behind the time value of money concept, which recognizes that money received today can be invested to generate returns.