Time Value of Money Quiz

Why is it generally better to receive $100 today rather than the same amount a year from now?

• Because money today can earn interest over time.

• Because $100 today is worth more than $200 in the future.

• Because future money is always less valuable.

• Because inflation will decrease the value of money.

What is the future value of $100 today if the interest rate is 10% for one year?

• $110

• $100

• $120

• $105

How do you calculate the present value of a future amount of money?

• Subtract the interest rate from the future amount.

• Multiply the future amount by the interest rate.

• Divide the future amount by 1 plus the interest rate.

• Add the future amount to the interest rate.

If you are offered $200 in two years with a 10% interest rate, what is its present value?

• $200

• $150

• $165

• $180

What concept helps you understand how much to invest today to reach a future financial goal?

• Simple interest

• Time value of money

• Inflation rate

• Exchange rate