Multiple Choice
A dollar paid (or received) in the future is:
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10. Time Value of Money
Time Value of Money Equations
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In time value of money terminology, a single cash flow received or paid at one point in time is also known as a:
A
Amortization schedule
B
Annuity
C
Lump sum
D
Perpetuity
Verified step by step guidance1
Understand the concept of time value of money, which recognizes that a sum of money has different values at different points in time due to its potential earning capacity.
Identify the types of cash flows: a single cash flow at one point in time, multiple cash flows over a period, or infinite cash flows.
Recall that an annuity refers to a series of equal payments made at regular intervals over a specified period.
Recognize that a perpetuity is a type of annuity that continues indefinitely, with payments made forever.
Conclude that a single cash flow received or paid at one point in time is called a lump sum, distinguishing it from annuities and perpetuities.
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