The process of converting an amount given at the present time into a future value is called:
A) annualizing.
B) discounting.
C) compounding.
D) capital budgeting.

Question

Quizplus · Accepted Answer

The process of converting an amount given at the present time into a future value is called compounding. Compounding refers to the calculation of interest on both the principal amount and the accumulated interest of a deposit or loan. It involves adding earned interest back to the principal amount, leading to a larger future value. A is incorrect because annualizing refers to the process of converting a rate or value from a short-term period (such as a month or quarter) to an annual basis. B is incorrect because discounting refers to the process of calculating the present value of a future cash flow or sum of money, by applying a discount rate. D is incorrect because capital budgeting refers to the process of evaluating and selecting investment projects that are expected to generate long-term benefits for a business.

The Process of Converting an Amount Given at the Present