Created from Youtube video: https://www.youtube.com/watch?v=OyEqV6Eb21UvideoConcepts covered:time value of money, present value, future value, discounting, compounding
The video explains the concept of the time value of money, emphasizing that money available today is worth more than the same amount in the future due to its potential earning capacity, inflation, and purchasing power. It covers key concepts such as present value, future value, discounting, compounding, and the rule of 72, illustrating how these principles are applied in financial calculations.
Time Value of Money
Concepts covered:time value of money, present value, future value, discounting, compounding
The video explains the concept of the time value of money, emphasizing that money available today is worth more than the same amount in the future due to its potential earning capacity, inflation, and purchasing power. It covers key concepts such as present value, future value, discounting, compounding, and the rule of 72, illustrating how these principles are applied in financial calculations.
Question 1
Money today is worth more than in the future.
Question 2
What is the difference between simple and compound interest?
Question 3
In present value calculations, the interest rate is often referred to as the _____ rate.
Question 4
CASE STUDY: An investor wants to maximize returns by choosing between simple and compound interest.
Identify the incorrect strategy for maximizing returns.
Question 5
CASE STUDY: A student is learning about present value and discount rates in finance class.
Select three correct present value concepts.
Question 6
Future value increases with higher interest rates over time.
Question 7
How is present value calculated?
Question 8
To calculate simple interest, multiply principal, interest rate, and _____.
Question 9
CASE STUDY: A company is evaluating two investment options with different interest rates and time periods.
Identify the incorrect application of time value of money.
Question 10
Present value involves discounting future cash flows.
Question 11
What affects the time value of money?
Question 12
The process of calculating future value involves _____, unlike simple interest.
Question 13
Discount rate and interest rate are always the same.
Question 14
What increases future value over time?
Question 15
The concept that money today is worth more than in the future is called the time value of _____.
Question 16
Simple interest earns interest on interest.
Question 17
What is the formula for future value?
Question 18
For a given interest rate, as time increases, the future value _____.
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