Which one of the following statements is correct concerning the time value of money?
A) The future value of $1 at the end of a year is equal to $1 times 1 plus the annual interest rate.
B) As the interest rate increases for any given year, the future value interest factor will decrease.
C) The future value of $1 decreases with the passage of time.
D) The future value interest factor is equal to zero if the interest rate is zero.

Question

Quizplus · Accepted Answer

The future value of $1 at the end of a year is equal to $1 times 1 plus the annual interest rate. This statement represents the concept of time value of money, which states that the value of money today is worth more than the same amount of money in the future due to the potential for earning interest. As such, the future value of a dollar would increase with interest rates and time. Statements B, C, and D are incorrect as they do not accurately reflect the concept of time value of money.

Which One of the Following Statements Is Correct Concerning the Time