The concept of the time value of money indicates that:
A)investments need a long time in order to produce extra money.
B)a dollar received today is worth more than a dollar received a year from today.
C)the prices of goods and services will fluctuate over time due to inflation and higher costs of production.
D)monetary systems tend to become more sophisticated over time.

Question

Quizplus · Accepted Answer

The time value of money concept suggests that a dollar received today is worth more than a dollar received in the future due to the potential earning power of that money if invested or put to work immediately. This is because the money could earn interest or returns over time, increasing its value. Therefore, the present value of a future cash flow will always be less than the future value of that same cash flow, assuming a positive interest rate.

The Concept of the Time Value of Money Indicates That