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

Many investments require a series of cash flows, which makes understanding the present value of a(n) ______ important.

single sum

stock dividend

annuity

bond

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Verified step by step guidance

Understand the concept of 'present value': Present value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return. It is a fundamental concept in financial accounting and investment analysis.

Recognize the term 'annuity': An annuity refers to a series of equal payments made at regular intervals over a specified period. Examples include loan payments, lease payments, or investment returns.

Identify why the present value of an annuity is important: Many investments involve recurring cash flows, such as monthly payments or annual returns. Calculating the present value of these cash flows helps determine the investment's worth today.

Learn the formula for the present value of an annuity: The formula is \( PV = P \times \frac{1 - (1 + r)^{-n}}{r} \), where \( PV \) is the present value, \( P \) is the payment amount per period, \( r \) is the interest rate per period, and \( n \) is the number of periods.

Apply the formula to solve problems: Substitute the given values for \( P \), \( r \), and \( n \) into the formula to calculate the present value of the annuity. This step helps assess the investment's value or make informed financial decisions.