Which of the following statements best illustrates the time-value of money concept?
A) Bob is willing to forgo receiving $100 today in order to receive $110 next month.
B) Tom is indifferent between receiving $50 now and receiving $50 six months from now.
C) Terry works for an hourly wage instead of a fixed salary.
D) Jeff would prefer to receive $200 at the end of the year instead of $220 now.

Question

Quizplus · Accepted Answer

The time-value of money concept refers to the idea that money received today is worth more than the same amount of money received in the future because it can be invested and earn interest. Bob's willingness to wait for $110 next month instead of receiving $100 today shows that he understands the concept of time-value of money. Choice B refers to indifference, not time-value of money. Choice C (hourly wage) and D (preference for timing of payment) do not directly relate to the time-value of money concept.

Which of the Following Statements Best Illustrates the Time-Value of Money