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

Having a _______ interest rate will increase the total cost of an asset when buying on credit.

lower

zero

higher

fixed

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Verified step by step guidance

Understand the concept of interest rate: In financial accounting, the interest rate is the percentage charged on the principal amount borrowed. A higher interest rate means more cost incurred over time when buying on credit.

Analyze the relationship between interest rate and total cost: The total cost of an asset purchased on credit includes the principal amount and the interest accrued over the repayment period. A higher interest rate increases the interest portion, thereby increasing the total cost.

Consider the options provided: Evaluate each option ('lower', 'zero', 'higher', 'fixed') in terms of its impact on the total cost of an asset purchased on credit.

Focus on the correct option: A 'higher' interest rate directly increases the total cost because the interest charged on the borrowed amount is greater.

Conclude the reasoning: The correct answer is 'higher' because it aligns with the principle that higher interest rates lead to higher total costs when buying on credit.