Asked by Heather Weathers on Jul 04, 2024
Verified
The value today of a specific sum of money to be received in the future is referred to as:
A) the future value of that sum of money.
B) the present value of that sum of money.
C) compound interest.
D) the time-value of money.
Present Value
The current value of a future sum of money or stream of cash flows given a specified rate of return.
Future Value
The amount to which some current amount of money will grow if interest earned on the amount is left to compound over time.
- Acquire knowledge about the theories of future value, present value, and compound interest as they apply to personal finance.
Verified Answer
JP
Jorgie PolyzosJul 07, 2024
Final Answer :
B
Explanation :
The value today of a specific sum of money to be received in the future is referred to as the present value of that sum of money. This concept is based on the time-value of money, which recognizes that money received or paid out in the future has a different value than money received or paid out today due to factors such as inflation and opportunity cost. The future value of that sum of money refers to its value at a future point in time, given a specific rate of interest. Compound interest is the interest earned on both the principal and any previously earned interest.
Learning Objectives
- Acquire knowledge about the theories of future value, present value, and compound interest as they apply to personal finance.