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 term refers to the increase in an amount of money as a result of interest earned over time?

Discount Rate

Present Value

Annuity

Future Value

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Verified step by step guidance

Understand the concept of 'Future Value': Future Value refers to the amount of money that an investment will grow to over a period of time at a specified interest rate. It accounts for the interest earned on the principal amount.

Recognize the formula for calculating Future Value: The formula is \( FV = PV \times (1 + r)^n \), where \( FV \) is the Future Value, \( PV \) is the Present Value, \( r \) is the interest rate per period, and \( n \) is the number of periods.

Differentiate between the terms provided: 'Discount Rate' refers to the rate used to calculate Present Value from Future Value, 'Present Value' is the current worth of a future sum of money, and 'Annuity' refers to a series of equal payments made at regular intervals. None of these terms describe the increase in money due to interest over time.

Relate the term 'Future Value' to the problem: Since Future Value specifically measures the increase in money due to interest earned over time, it is the correct term for this scenario.

Conclude that understanding the relationship between Present Value, interest rate, and time is essential to grasp the concept of Future Value in financial accounting.