ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.

Detailed explanation-2: -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-3: -Answer and Explanation: The correct answer is b. A dollar received today is worth more than a dollar received in the future. The time value of money states that money is worth more today than in the future.

Detailed explanation-4: -Interest rates are a key quantitative representation of the time value of money. When investing in bonds, for example, the interest increases the value of deposited cash over time if left reinvested.

Detailed explanation-5: -Compounding is the impact of the time value of money (e.g., interest rate) over multiple periods into the future, where the interest is added to the original amount. For example, if you have $1, 000 and invest it at 10 percent per year for 20 years, its value after 20 years is $6, 727.