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

Which of the following are the two most common types of interest used in time value of money calculations?

Fixed interest and variable interest

Simple interest and compound interest

Nominal interest and effective interest

Annual percentage rate and periodic rate

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Verified step by step guidance

Understand the concept of 'time value of money,' which refers to the idea that money available today is worth more than the same amount in the future due to its earning potential.

Learn about 'simple interest,' which is calculated only on the principal amount of a loan or investment. The formula for simple interest is:

I = P \times r \times t

, where I = interest, P = principal, r = rate, and t = time.

Understand 'compound interest,' which is calculated on the principal amount and also on the accumulated interest from previous periods. The formula for compound interest is:

A = P (1 + r) n

, where A = total amount, P = principal, r = rate, and n = number of compounding periods.

Compare simple interest and compound interest to understand their differences. Simple interest grows linearly, while compound interest grows exponentially due to the compounding effect.

Recognize that simple interest and compound interest are the two most common types of interest used in time value of money calculations because they represent fundamental methods of calculating the growth of money over time.