Question

Expert-verifiedFound in: Page 279

Book edition
16th

Author(s)
Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Pages
768 pages

ISBN
9781259277160

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

**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.

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

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.

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