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 will increase the future value of an annuity, assuming all other factors remain constant?

Increasing the interest rate

Decreasing the number of payment periods

Reducing the amount of each periodic payment

Making payments at the end of each period instead of the beginning

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Verified step by step guidance

Understand the concept of future value of an annuity: The future value of an annuity is the total value of a series of payments made at regular intervals, compounded at a specific interest rate over time.

Identify the factors affecting the future value of an annuity: These include the interest rate, the number of payment periods, the amount of each periodic payment, and the timing of payments (beginning or end of the period).

Analyze the impact of increasing the interest rate: A higher interest rate increases the compounding effect, leading to a higher future value of the annuity. This is because the payments grow faster due to the increased rate of return.

Evaluate the effect of decreasing the number of payment periods: Reducing the number of payment periods decreases the total number of payments and the compounding effect, which would lower the future value of the annuity.

Consider the impact of reducing the amount of each periodic payment and changing the timing of payments: Reducing the payment amount directly lowers the total contributions, decreasing the future value. Making payments at the end of each period instead of the beginning reduces the compounding time for each payment, also lowering the future value.