Future Value Calculation
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Question
It is the value today of an amount to be received in future; it is the amount that would have to be invested today at a given interest rate over a specified period of time to accumulate the future amount. What is it?
Answers
Explanations
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A. B. C. D.A
The term being described is present value. Present value is the concept of determining the current value of a future sum of money, based on a specified interest rate and time period.
In other words, present value is the amount of money that would need to be invested today, at a given interest rate, in order to accumulate a specific amount of money at a future point in time.
The calculation of present value involves discounting the future amount of money by a factor that reflects the time value of money and the specified interest rate. The higher the interest rate, the lower the present value, and the longer the time period, the lower the present value as well.
Present value is an important concept in finance and investment because it allows investors to compare the value of different investment opportunities, taking into account their timing and risk. It is also useful in making financial decisions about loans, mortgages, and other financial obligations, as it allows individuals and businesses to determine the true cost of borrowing or lending money.
