Asked by LAVISH SHUKLA on May 02, 2024
Verified
In time-value of money calculations, discounting is the reverse of compounding.
Time-Value
The idea that having money now is more valuable than having the same sum in the future because of the potential to earn more over time.
Discounting
The process of determining the present value of a payment or a stream of payments that is to be received in the future.
Compounding
The process whereby interest is added to the principal sum, so that from that moment on, the interest that has been added also earns interest.
- Comprehend the concept of time-value of money and its consequences for financial choices.
Verified Answer
ZK
Zybrea KnightMay 07, 2024
Final Answer :
True
Explanation :
Discounting involves determining the present value of a future amount by applying a discount rate, while compounding involves calculating the future value of a present amount by applying an interest rate, making them reverse processes of each other.
Learning Objectives
- Comprehend the concept of time-value of money and its consequences for financial choices.