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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is true when interest rates rise?

The future value of a present cash flow remains unchanged.

The present value of a future cash flow decreases.

The present value of a future cash flow increases.

The future value of a present cash flow decreases.

Previous problemNext problem

Verified step by step guidance

Understand the relationship between interest rates and present value: When interest rates rise, the discount rate used to calculate the present value of future cash flows increases. This results in a lower present value because future cash flows are discounted more heavily.

Understand the relationship between interest rates and future value: The future value of a present cash flow is determined by compounding the cash flow at the given interest rate. If interest rates rise, the future value of a present cash flow increases because the compounding effect is stronger.

Analyze the options provided: Evaluate each statement in the context of the relationships explained above. For example, 'The future value of a present cash flow remains unchanged' is incorrect because future value depends on the interest rate.

Focus on the correct statement: 'The present value of a future cash flow decreases' is correct because higher interest rates lead to a higher discount rate, reducing the present value of future cash flows.

Conclude the reasoning: The correct answer is based on the fundamental principles of time value of money, where interest rates directly impact the present and future values of cash flows.