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 varies directly with the interest rate in time value of money calculations?

Present value of an ordinary annuity

Future value of a single sum

Present value of a single sum

Discount factor

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Verified step by step guidance

Understand the concept of time value of money: Time value of money calculations involve determining how the value of money changes over time due to interest rates. Key components include present value, future value, and discount factors.

Analyze the relationship between interest rates and future value: The future value of a single sum increases directly with the interest rate because higher interest rates lead to greater accumulation of interest over time.

Examine the present value of a single sum: The present value of a single sum decreases as the interest rate increases because the discounting effect becomes stronger, reducing the current worth of future cash flows.

Consider the present value of an ordinary annuity: Similar to the present value of a single sum, the present value of an ordinary annuity decreases as the interest rate increases due to the discounting effect.

Evaluate the discount factor: The discount factor is inversely related to the interest rate. As the interest rate increases, the discount factor decreases, which reduces the present value of future cash flows.