Question

Explain the time value of money concept. What is meant by the effective interest rate. How are time value of money concepts applied to accounting applications in determining the present value of expected cash flows and in valuing bonds?

Answer #1

Time Value of Money concept is that money available at the present time is more worth than the identical sum in the future due to its potential earning capacity.

Effective interest rate does take the compounding period into account and thus is more accurate measure of interest charges.

In which the amount of money today is worth than the same amount in the future.

In which it determines the fair price of a bond.the value of a bond is determined by discounting the bond's expected cash flow to the present using the appropriate discount rate.

Explain the time value of money concept. What is meant by
the effective interest rate. How are time value of money concepts
applied to accounting applications in determining the present value
of expected cash flows and in valuing bonds?

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__________.
Select one:
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b. valuing a series of future cash flows.
c. predicting discount rates.
d. adding the number of cash flows.
e. identifying the amount of cash flows.

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impacting the time value of money? How might this change the value
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How much has accumulated in the account by January...

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