BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Discounting
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Compounding
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All of the Above
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None of the Above
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Detailed explanation-1: -Process of calculating future value of money from present value is classified as compounding. Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. Hence, correct answer is option A.
Detailed explanation-2: -What is compounding? Drug compounding is often regarded as the process of combining, mixing, or altering ingredients to create a medication tailored to the needs of an individual patient. Compounding includes the combining of two or more drugs. Compounded drugs are not FDA-approved.
Detailed explanation-3: -In general, the future value of a sum of money today is calculated by multiplying the amount of cash by a function of the expected rate of return over the expected time period.
Detailed explanation-4: -Answer : d. discounting is the process of finding the present value in todays dollars of some future amount. A discount rate of interest is used and a period of time must be given.
Detailed explanation-5: -Present Value = It is the value of a sum of money today. Future Value = It is the value of a sum of money in the future. Compounding = Finding the future value from present value. Discounting = Finding the present value from future value.