Which of the following statements is true of time value of money?
A) A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation.
B) A dollar received today is worth less than a dollar to be received in the future because future dollars are not affected by inflation.
C) A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return.
D) A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it.

Question

Quizplus · Accepted Answer

The time value of money refers to the concept that a dollar received at different times has different values. Choice C is true because a dollar received today can be invested and earn a return, increasing its value over time. Inflation is not the reason for the difference in value, but rather the earning potential of the money. Therefore, choices A, B, and D are incorrect.

Which of the Following Statements Is True of Time Value