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US CMA Part 2 Time Value of Money — practice questions

Explore 22 free Time Value of Money questions in US CMA Part 2 Finance. Open each question or exercise to read its content, reference answers and available explanation.

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Time Value of Money questions and exercises with answers

Showing questions 1–22 of 22.

The time value of money concerns the value of money relative to the amount of:Read the answer and worked solution →Money invested today grows into an amount referred to as its:Read the answer and worked solution →The amount you have invested today is referred to as the:Read the answer and worked solution →The most basic type of financial transaction involves a simple, one-time amount of cash called a:Read the answer and worked solution →A lump sum can be either a receipt, meaning an inflow, or a payment, meaning an:Read the answer and worked solution →The interest rate is often also referred to as the:Read the answer and worked solution →Interest income earned in later periods that is based on interest earned in prior periods is called:Read the answer and worked solution →Compound interest is described in the example as interest on:Read the answer and worked solution →If a compounding period is not specifically stated, it is always assumed to be:Read the answer and worked solution →In the second-year example, the friend reinvests the principal together with the:Read the answer and worked solution →Discounting is described as the exact opposite of which process?Read the answer and worked solution →The rule of 72 estimates the time required to do what to a value?Read the answer and worked solution →Under the rule of 72, an investment growing at 8 percent a year doubles in roughly:Read the answer and worked solution →Under the rule of 72, an investment growing at 6 percent a year doubles in roughly:Read the answer and worked solution →A friend with 1,000 dollars principal earning 40 dollars in year one has an interest rate of:Read the answer and worked solution →Reinvesting both the 1,000 dollar principal and the 40 dollars of interest means year two earns interest on:Read the answer and worked solution →Working out today's worth of a house price six years from now is an example of:Read the answer and worked solution →Work the rule of 72Read the answer and worked solution →Match each time value termRead the answer and worked solution →True or false: time value of moneyRead the answer and worked solution →Tap what belongs to each directionRead the answer and worked solution →Complete the time value rulesRead the answer and worked solution →

Worked practice questions

The time value of money concerns the value of money relative to the amount of:

  1. Time it is held
  2. Space it fills
  3. Weight it carries
  4. Paper it uses
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Correct answer: A. Time it is held

1. Money's worth is not fixed across time. 2. The time value of money is abbreviated TVM. 3. It is a critical concept in understanding the value of money. 4. That value is relative to the amount of time money is held, saved, or invested. _Source: OpenStax Principles of Finance (CC BY 4.0), Ch 7 'Time Value of Money I: Single Payment Value'_

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Money invested today grows into an amount referred to as its:

  1. Residual value
  2. Future value
  3. Present value
  4. Nominal value
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Correct answer: B. Future value

1. Value at a later date has its own name. 2. Interest is earned on amounts you have invested. 3. Time therefore adds value to your savings. 4. That later amount is referred to as future value, abbreviated FV. _Source: OpenStax Principles of Finance (CC BY 4.0), Ch 7 'Time Value of Money I: Single Payment Value'_

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The amount you have invested today is referred to as the:

  1. Present value
  2. Future value
  3. Terminal value
  4. Salvage value
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Correct answer: A. Present value

1. The two ends of a time value calculation each have a name. 2. Interest is earned on amounts you have invested. 3. The amount invested is the present value. 4. Time then adds value to give the future value. _Source: OpenStax Principles of Finance (CC BY 4.0), Ch 7 'Time Value of Money I: Single Payment Value'_

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