Time Value of Money Quiz

1. What is the time value of money?

a) The value of money decreases over time.
b) The concept that money available today is worth more than the same amount in the future.
c) The value of money remains constant regardless of time.

2. Which factor connects the present value of money to its future value?

a) The interest rate
b) The inflation rate
c) The exchange rate

3. What does the future value of money represent?

a) The value of money in the past
b) The value of money at present
c) The value of money in the future

4. How does compounding affect the future value of money?

a) It decreases the future value.
b) It has no effect on the future value.
c) It increases the future value.

5. Which equation represents the future value of a single sum of money?

a) FV = PV / (1 + r)^n
b) FV = PV * (1 + r)^n
c) FV = PV - (1 + r)^n

6. How does increasing the number of compounding periods per year affect the future value of money?

a) It decreases the future value.
b) It has no effect on the future value.
c) It increases the future value.

7. What role does the period play in calculating the future value of money?

a) It determines the interest rate.
b) It indicates the present value.
c) It represents the number of years or compounding periods.