Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 4: Question (page 279)

How is the future value related to the present value of a single sum?

Short Answer

Expert verified

Answer

The future value of a single sum is computed by applying the relevant interest rate to the present value of the sum. So, future value and present value are related to each other.

Step by step solution

01

Meaning of time value of money

The time value of money states that the dollar amount received today is worth more than a similar dollar amount received in the future.

02

Relationship between present value and future value

The future value of a particular sum of money is obtained by adding the time value of money to the present value of money. The time value of money is computed by using a specific rate of interest. This is why both the future value and the present value of a certain sum are related to one another.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is the present value of

c. $26,000 in 14 years at 6 percent

Question:Analogue Technology has preferred stock outstanding that pays a \(9 annual dividend. It has a price of \)76. What is the required rate of return (yield) on the preferred stock?

b. Would the present value of the funds in part a be enough to buy a $2,900 concert ticket?

You invest \(3,000 for three years at 12 percent.Combine these steps using the formula FV 5 PV 3 (1 1 i) n to find the future value of \)3,000 in 3 years at 12 percent interest.

What is the present value of

b. $16,600 in 5 years at 9 percent?

See all solutions

Recommended explanations on Business Studies Textbooks

Project Planning & Management

Read Explanation

Human Resources

Read Explanation

Strategy

Read Explanation

Business Data Analytics

Read Explanation

Organizational Behavior

Read Explanation

Actuarial Science in Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free