Which of the following describes the time value of money?
A) The time value of money has no effect on the timing of capital investments.
B) Money loses its purchasing power over time through inflation.
C) The fact that invested cash may not earn interest over time is called the time value of money.
D) A dollar received today is worth more than a dollar to be received in the future.

Question

Quizplus · Accepted Answer

The time value of money refers to the idea that a dollar received today is worth more than a dollar to be received in the future due to the potential for investing and earning interest, as well as the impact of inflation. This concept is important in financial decision making, as it affects the timing and value of cash flows. Option B is partially correct, but it only addresses the impact of inflation on purchasing power, not the broader concept of the time value of money. Options A and C are incorrect statements about the time value of money.

Which of the Following Describes the Time Value of Money