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Ch.1 · Comparing Financial Products · easy

What is the 'time value of money' principle?

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EXPLANATION

Time value of money states that money available today can be invested to earn returns, making it worth more than the same amount in the future. This is the foundational principle behind compounding, present value, and future value calculations.

A.A rupee available today is worth more than a rupee available in the future due to its earning potential [✓ Correct]

B.Money loses value over time due to inflation, so investing is risky

C.The longer you hold an investment, the lower its value becomes

D.Money held in a bank account multiplies faster than money invested in equity

EXPLANATION

Time value of money states that money available today can be invested to earn returns, making it worth more than the same amount in the future. This is the foundational principle behind compounding, present value, and future value calculations.

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