Question

Which one of the following statements correctly defines a time value of money relationship? Multiple Choice 2.5 points eBook • Time and future values are inversely related, all else held constant. Print References O Interest rates and time are positively related, all else held constant. O An increase in a positive discount rate increases the present value. O An increase in time increases the future value given a zero rate of interest. O Time and present value are inversely related, all else held constant.

Answer 1

Solution time Value of money Oilallonthp Anguo ame and present value are in versely solated all else held constant Time ie number period is more the amount set aside today will be less (Vice Versci 2 Project x has both a higher prescut anda higher Jurure value than profect Y. For example, let the discount scale be 5% - Project y Project prfactor date prof. Cashflow, Can How gate @s() Prof Condrrows @st) Counflous 0.95 SOAS 7000 7500 0.95 0.91 11.850o 7280 6650 68as 6880 C990 27325 086 2. 8000 3.7500 40 7000 6450 5740 8 Soo 0.82 27.5us In Comparison project x has higher proput Value project luan project Y. and in Fv of (x) = 33,481 > Fug (y) = 33,213.771

3 Project B is worth was today tham Project A Taking same disount sale @ sli Project A CF prfactor Progo y low cr Pfador pugcof 2000 oas 1900 Booo 09 2230 1. 4ooo 0.95 0.4 3800 2230 2. 3000 0.86 2000 3000 0.82 2460 - 4.3000 0.82 8810 8990 Project B pre profeet In Comparison Apr