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

A certificate of deposit pays a higher interest rate than a savings account because the money is:

insured for a higher amount by the FDIC

invested in riskier assets by the bank

subject to daily compounding interest

locked in for a fixed period and cannot be withdrawn without penalty

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Verified step by step guidance

Understand the concept of a certificate of deposit (CD): A CD is a financial product offered by banks that provides a fixed interest rate in exchange for keeping the money deposited for a specified period.

Recognize the key feature of a CD: The money is locked in for a fixed period, meaning the depositor cannot withdraw the funds without incurring a penalty.

Compare a CD to a savings account: Unlike a savings account, which allows flexible withdrawals, a CD requires the depositor to commit to a fixed term, which is why it typically offers a higher interest rate.

Clarify why the interest rate is higher: Since the bank can rely on the funds being available for a fixed period, it can use them for longer-term investments, allowing it to offer a higher return to the depositor.

Understand the penalty for early withdrawal: If the depositor withdraws funds before the maturity date, they will face a penalty, which reinforces the fixed-term nature of the CD.