Present and future value concepts are used to determine the wealth provided by an investment.

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BlackTom AI · Accepted Answer

The prompt asks us to evaluate the statement: 'Present and future value concepts are used to determine the wealth provided by an investment.'
Option 1: True. Present value (PV) and future value (FV) are core time-value of money concepts that quantify how money available now compares to money in the future. FV shows how much an investment's cash flows will grow to over time at a given rate, while PV discounts future cash flows back to their worth today. Together, these concepts allow us to measure the wealth an investment can generate by comparing amounts across different time periods, making them essential tools in assessing investment wealth.
Option 2: False. This would be incorrect because PV and FV are precisely designed to account for the time value of money in evaluating investments. They enable apples-to-apples comparisons of cash flows occurring at different times and help determine the true wealth created by an investment, not ignore time value.

In summary, recognizing both PV and FV as fundamental to assessing wealth from investments aligns with standard financial theory, since time value of money is central to judging how much future money is worth in present terms and vice versa.

BUSFIN 1200 AU2025 (2014) Final Exam- Requires Respondus LockDown Browser

Present and future value concepts are used to determine the wealth provided by an investment.

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