Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

The variables in a future value of a lump sum problem include all of the following, except:

Number of Periods (n)

Present Value (PV)

Interest Rate (r)

Periodic Payment (PMT)

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Verified step by step guidance

Understand the concept of the future value of a lump sum. It refers to the value of a single amount of money invested today at a given interest rate over a specified number of periods.

Identify the key variables involved in the calculation of the future value of a lump sum. These include: Number of Periods (n), Present Value (PV), and Interest Rate (r).

Recognize that the formula for the future value of a lump sum does not include Periodic Payment (PMT). The formula is typically expressed as:

FV = PV \times (^{1 + r) n}

, where FV is the future value, PV is the present value, r is the interest rate, and n is the number of periods.

Clarify that Periodic Payment (PMT) is a variable used in annuity problems, not in lump sum problems. An annuity involves a series of equal payments made at regular intervals, whereas a lump sum is a single payment or investment.

Conclude that the correct answer to the problem is Periodic Payment (PMT), as it is not a variable used in the future value of a lump sum calculation.