ECONOMICS
ECONOMIC DEVELOPMENT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
True
|
|
|
False
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. The time value of money is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future.
Detailed explanation-2: -Definition: The time value of money refers to the fact that money received in the present is worth more than the same amount received in the future, due to the earning power of the money.
Detailed explanation-3: -The time value of money is a concept that states a dollar today is always worth more than a dollar tomorrow (or a year from now). One reason for this is the opportunity costs of holding cash instead of investing in higher-return projects. It also arises due to inflation.
Detailed explanation-4: -Inflation: In an inflationary economy, the money received today, has more purchasing power than the money to be received in future. In other words, a rupee today represents a greater real purchasing power than a rupee a year after.
Detailed explanation-5: -There are two main reasons why money in the present is worth more than an equal amount in the future: Inflation and Opportunity Cost. Inflation is a phenomenon in which the prices of goods and services increase gradually over time.