The concept that dollar today is worth more than a dollar received in future. It is:
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A. B. C. D.A
The correct answer is A. Time value of money.
Time value of money is a financial concept that suggests that the value of money today is worth more than the same amount of money received in the future. This is due to the potential earning power of money when invested or put to work. The concept is based on the understanding that money has a time value, meaning that a dollar today is worth more than a dollar received in the future.
There are two main factors that contribute to the time value of money: interest rates and inflation. Interest rates are the cost of borrowing money or the return on invested money, and inflation refers to the decrease in purchasing power of money over time.
Time value of money can be demonstrated through several financial calculations, such as present value, future value, annuities, and perpetuities. These calculations help to determine the value of money at different points in time and under different circumstances.
Compounding is another financial concept that relates to the time value of money. It refers to the process of earning interest on both the principal amount and the interest earned on that amount over time. Timeline refers to a visual representation of events over time, while future value is a calculation of the value of an asset or investment at a specific point in the future.
Understanding the time value of money is important for making informed financial decisions, such as investing, borrowing, and saving. By understanding the time value of money, individuals and businesses can make decisions that will help them achieve their financial goals and objectives.