All else equal, a dollar received sooner is worth more than a dollar received at some later date, because the sooner the dollar is received the more quickly it can be invested to earn a positive return. True False

Question

Cameron Holden

Business

30 June, 11:30

All else equal, a dollar received sooner is worth more than a dollar received at some later date, because the sooner the dollar is received the more quickly it can be invested to earn a positive return. True False

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Stacy Zuniga · Answer 1

True

Explanation:

The time value of money involves the relationship of equivalence between cash flows occurring at different dates.

The later a cash flow is received the less worthier it is as cash flow received earlier than that can be invested to earn return coupled with the fact that the later a cash flow is expected the higher the chances that there would a default on the party of the person making the cash available.

This uncertainty then makes a dollar received sooner worth more than the one received at some later time.