Which one of these statements related to the time value of money is correct? Ass

Question

Which one of these statements related to the time value of money is correct? Assume a positive rate of interest.

• A. A dollar increases in value the further into the future it is received.

• B. The future value of an invested dollar is inversely related to the rate of interest.

• C. The present value of a dollar to be received in 1 year is directly related to the interest rate.

• D. A dollar received today is more valuable than a dollar received next month.

• E. A dollar invested today will increase in value in a linear manner if interest earned is reinvested.

Explanation / Answer

D) A dollar received today is more valuable than a dollar received next month

This is because dollar has interest earning ability. One can invest dollar today and can earm interest on same for one month. Further it alsoeliminate risk of not getting dollar after one month. Thus dollar received today is more valuabale than dollar received in next month

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