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

What is the present value of \$6,811 to be received in one year if the discount rate is 6.5\%? (Round your answer to the nearest dollar.)

$6,398

$6,811

$6,100

$7,254

Previous problemNext problem

Verified step by step guidance

Understand the concept of present value: Present value (PV) is the current worth of a future sum of money given a specific discount rate. It accounts for the time value of money, which states that money today is worth more than the same amount in the future due to its earning potential.

Identify the formula for present value: The formula is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the discount rate (expressed as a decimal), and n is the number of periods.

Substitute the given values into the formula: FV = $6,811, r = 6.5% (or 0.065 as a decimal), and n = 1 year. The formula becomes PV = 6811 / (1 + 0.065)^1.

Simplify the denominator: Calculate (1 + 0.065), which equals 1.065. Then raise it to the power of 1 (since n = 1), which remains 1.065.

Divide the future value by the calculated denominator: Divide $6,811 by 1.065 to find the present value. Round the result to the nearest dollar to match the problem's requirements.