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

Other things being equal, which of the following will produce the greatest future value for a single sum invested today?

More frequent withdrawals

A higher interest rate

A lower interest rate

A shorter investment period

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Verified step by step guidance

Understand the concept of future value: Future value refers to the amount of money an investment will grow to over a specified period of time at a given interest rate. It is influenced by factors such as the interest rate, investment period, and frequency of withdrawals.

Recognize the impact of interest rate: A higher interest rate increases the growth of the investment because the principal amount earns more interest over time. This is a key factor in maximizing future value.

Analyze the effect of investment period: A longer investment period allows the interest to compound over more time, leading to a greater future value. A shorter investment period reduces the compounding effect.

Consider the role of withdrawals: More frequent withdrawals reduce the principal amount available for earning interest, which decreases the future value. Less frequent or no withdrawals allow the principal to grow uninterrupted.

Conclude that the greatest future value is achieved by combining a higher interest rate, a longer investment period, and minimal or no withdrawals. Among the options provided, a higher interest rate is the most significant factor in producing the greatest future value.