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Good luck Question 11 Which of the following statements is true? Select the correct answer from the options below Time value of money means that E1 invested today will grow with the interest rate over the course of time Time value of money means money should be paid in due course on time Time value of money means that C1 has a monetary value Time value of money means that E1 is a legal tender - Previous

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Good luck
Question 11
Which of the following statements is true?
Select the correct answer from the options below
Time value of money means that E1 invested today will grow with the interest rate over the course of time
Time value of money means money should be paid in due course on time
Time value of money means that C1 has a monetary value
Time value of money means that E1 is a legal tender
- Previous

Good luck Question 11 Which of the following statements is true? Select the correct answer from the options below Time value of money means that E1 invested today will grow with the interest rate over the course of time Time value of money means money should be paid in due course on time Time value of money means that C1 has a monetary value Time value of money means that E1 is a legal tender - Previous

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KelseyElite · Tutor for 8 years

Answer

Therefore, the statement 'Time value of money means that \( \mathrm{E} 1 \) invested today will grow with the interest rate over the course of time' is true.

Explain

## Step 1:<br />Identify which statement most accurately aligns with the concept of the time value of money (TVM).<br /><br />This fundamental idea in finance suggests that a unit of currency today is worth more than a unit of the same currency in the future. This discrepancy is due to the potential of the current unit of currency to earn returns if it's invested correctly.<br /><br />## Step 2:<br />Evaluate each choice to determine which is the most accurate representation of TVM.<br /><br />- TVM means that \( \mathrm{E} 1 \) invested today will grow with the interest rate over the course of time: This statement is congruent with the TVM concept. It implies that when an amount (represented as \( \mathrm{E} 1 \)) is invested today, it can earn an interest—the earnings increase with time, thanks to the compounding effect.<br /><br />- TVM means money should be paid in due course/on time: This statement, while advantageous, does not embody the TVM concept.<br /><br />- TVM means that \( \mathrm{f} 1 \) has a monetary value: Although this item obviously alludes to money, it does not reflect the fundamental TVM principle.<br /><br />- TVM means that \( \mathrm{Cl} \) is a legal tender: This remarks on the form of the money (not its intrinsic ability to provide future financial gains or potential reservations on the same), thereby misunderstanding the gist behind TVM.
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