TIME VALUE OF MONEY

What is the definition of time value of money?

• The value of money changes
• The value of money is fixed
• The value of money decreases
• The value of money increases

What is the formula for calculating future value of a lump sum amount?

• FV = PV * (1 + r)
• FV = PV / (1 + r)
• FV = PV + (1 + r)
• FV = PV - (1 + r)

What is the formula for calculating present value of a lump sum amount?

• PV = FV * (1 + r)
• PV = FV / (1 + r)
• PV = FV + (1 + r)
• PV = FV - (1 + r)

Why is it important to consider the time value of money in financial decision-making?

• To ensure profits are made
• To ensure financial stability
• To account for inflation rates
• To avoid taxes

What is the difference between compound interest and simple interest?

• Compound interest is more beneficial than simple interest
• Compound interest is calculated on the principal amount plus any interest earned
• Simple interest is more beneficial than compound interest
• Simple interest is calculated on the principal amount only

If you invest $10,000 today at an interest rate of 5%, what will be its future value after 10 years?

• 16289.5
• 10500
• 15500
• 18282.81

f you want to have $50,000 in your savings account after 5 years, how much money do you need to deposit today if the interest rate is 4%?

• 43028.04
• 38831.56
• 47619.05
• 45000