Which of the following statements is true of the time value of money?
A) It means a dollar received today is worth less than a dollar received tomorrow.
B) It assumes that inflation rate remains constant for the foreseeable future.
C) It refers to the fact that higher cash flows in earlier years are less desirable.
D) It is based on the assumption that people prefer to consume things at some time in the future rather than today.

Question

Quizplus · Accepted Answer

The time value of money refers to the concept that a dollar received today is worth more than a dollar received in the future due to factors such as inflation, opportunity cost of investing, and uncertainty. Therefore, statement A is true. Statement B is incorrect because inflation rates can vary widely over time. Statement C is incorrect because higher cash flows in earlier years are generally considered more desirable. Statement D is incorrect because time preferences can vary among individuals.

Which of the Following Statements Is True of the Time