Question

The time value of money refers to:
A. personal opportunity costs such as time lost on an activity.
C. changes in interest rates due to changes in the supply and demand for money in our economy.
D. increases in an amount of money as a result of interest.

Answer 1

The answer is D. increases in an amount of money as a result of interest.

Time Value of Money (TVM) is the idea that the money you have now can be invested to earn you more money. It is worth more in the bank now (because of investment) than a promise to receive 5 dollars in the future. 

Answer 2

Answer:

D. increases in an amount of money as a result of interest.

Explanation:

Economists explain that the interest rate is an economic variable that synthesizes the value of money over time. If you have a value today and apply that amount at a rate X% per month, at the end of the month you will have the total amount applied + X. This means your money has increased as a result of the interest earned on the application.

For example: $ 1000 at an interest rate of 1% per month. In 1 month you will get $ 1000 + $ 10 = $ 1010. In short, you have been in a better financial position due to the yield over time of your application.

Note: 1000 * 1% = 1000 * 0.01 = 10