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

The discount rate is the interest factor used to find the _____ of a future cash flow.

annuity value

compound interest

present value

future value

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Verified step by step guidance

Understand the concept of 'discount rate': The discount rate is the interest rate used to determine the present value of future cash flows. It reflects the time value of money, which means money today is worth more than the same amount in the future due to its earning potential.

Identify the relationship between the discount rate and present value: The discount rate is applied to future cash flows to calculate their present value. This process involves discounting the future cash flows back to their value today.

Recall the formula for present value: The present value (PV) of a future cash flow can be calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value, r is the discount rate, and n is the number of periods.

Analyze the options provided: The term 'present value' aligns with the concept of discounting future cash flows to their current worth. Other options like 'annuity value,' 'compound interest,' and 'future value' do not directly relate to the discount rate's purpose in this context.

Conclude that the correct answer is 'present value': The discount rate is specifically used to find the present value of a future cash flow, as it adjusts the future amount to reflect its value in today's terms.