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In: Accounting

​Time value of money considers many changes to the value of the dollar such as interest, inflation, deflation, etc.


Time value of money considers many changes to the value of the dollar such as interest, inflation, deflation, etc. 

True 

False 

Solutions

Expert Solution

The given statement is true.

The time value of money (TVM) assumes a dollar in the present is worth more than a dollar in the future because of variables such as inflation and interest rates. Inflation is the general increase in prices, which means that the value of money depreciates over time as a result of that change in the general level of prices. A dollar in the future will not be able to buy the same value of goods as it does today.

Changes in the price level are reflected in the interest rate. The interest rate is charged by financial institutions on loans (e.g., a mortgage or a car loan) to individuals or businesses and TVM is taken into account in setting the rate.

So the given statement that Time Value of money considers many changes to the value of dollars such as interest,inflation, deflation etc is absolutely true.

ekkarill92 answered 2 years ago
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