The time value of money is best defined as:
A)The compensation provided for investing money for a given period.
B)The concept that investing is always superior to consumption.
C)The concept that the value of the exchange rate varies over time.
D)The compensation provided for carefully timing one's investments.
E)None of the above.

Question

Quizplus · Accepted Answer

The time value of money refers to the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. In other words, it is the compensation provided for investing money for a given period. Option B is incorrect as investing is not always superior to consumption. Option C is incorrect as it refers to exchange rate and not the time value of money. Option D is incorrect as timing investments carefully is just one aspect of taking into account the time value of money.

The Time Value of Money Is Best Defined As