Understanding TVM Concepts

Match Present Value (PV) with its application.

• Calculating interest rates for loans.

• Estimating future stock prices.

• Determining tax liabilities for businesses.

• Valuing future cash flows in finance.

Match Future Value (FV) with its application.

• Calculating the future worth of an investment or savings.

• Determining the present value of future cash flows.

• Estimating the current value of an asset.

• Calculating the interest rate on a loan.

Match Annuity with its application.

• Life insurance and mortgage payments

• College tuition and emergency funds

• Investment growth and tax deductions

• Retirement income and structured settlements.

Match Perpetuity with its application.

• Valuation of assets generating constant income.

• Valuation of assets with fluctuating income.

• Calculation of short-term investments.

• Assessment of one-time cash flows.

Match Discount Rate with its application.

• Discount Rate is applied in net present value (NPV) calculations.

• Discount Rate is applied in stock market analysis.

• Discount Rate is used for calculating tax rates.

• Discount Rate is used for determining interest rates.

Match Opportunity Cost with its application.

• Opportunity cost is a concept used exclusively in economics without real-world applications.

• Opportunity cost is only relevant for financial investments.

• The application of opportunity cost is in decision-making, where individuals or businesses evaluate the trade-offs of different choices.

• Opportunity cost refers to the cost of production in manufacturing.

Match Present Value (PV) with business valuation.

• Present Value (PV) is used in business valuation to discount future cash flows to their current worth.

• Present Value (PV) is used to calculate future cash flows without discounting.

• Present Value (PV) only applies to real estate transactions.

• Present Value (PV) is irrelevant in business valuation.

Match Future Value (FV) with retirement savings.

• Future Value (FV) is the total amount contributed to retirement savings.

• Future Value (FV) is the projected amount of retirement savings at a future date.

• Future Value (FV) is the current value of retirement savings.

• Future Value (FV) is the interest rate applied to retirement savings.

Match Annuity with pension plans.

• Annuities are a type of retirement savings account.

• Pension plans provide a lump sum payment instead of regular payments.

• Pension plans are not related to annuities.

• Pension plans are a type of annuity.

Match Perpetuity with university endowment funds.

• Perpetuity requires a fixed term for university endowment funds.

• Perpetuity is only applicable to short-term investments in university endowment funds.

• Perpetuity leads to unpredictable funding for university endowment funds.

• Perpetuity provides a stable income stream for university endowment funds.