The time value of money refers to:
A) personal opportunity costs such as time lost on an activity.
B) financial decisions that require borrowing funds from a financial institution.
C) changes in interest rates due to changes in the supply and demand for money in our economy.
D) increases in an amount of money as a result of interest.
E) changing demographic trends in our society.

Question

Quizplus · Accepted Answer

The time value of money is the concept that money received in the present time is worth more than the same amount of money received in the future because of its potential to earn interest. It relates to the increase in an amount of money due to interest over time. Option A refers to personal opportunity costs, Option B refers to borrowing funds, Option C refers to changes in interest rates, and Option E refers to demographic trends, which are not directly related to the time value of money.

The Time Value of Money Refers To