Test Your Knowledge Part I
Question 1

Let's say that your friend gives you the option of get $100 today or $100 in a month. Which option should you choose using concepts from the Time Value of Money?
Take the $100 in a month.
Hint:
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Take the $100 today.

Question 1 Explanation:
We should choose to get the $100 today due to the concept of the time value of money. The $100 is worth more to us today since we could invest the money and get interest from it.
Question 2

You invest $500 in your savings account which has an interest rate of 4%. How much interest did you get on the $500 one year from now?
$20.00


$520.00
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$504.00
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$4.00
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Question 2 Explanation:
That's right! To find the interest rate after one year, we can take the original amount and multiply it be the interest rate: $500 x 0.04 = $20.00
Question 3

Say you received $750 and deposited it in your savings account that has an interest rate of 3%. What will your savings account balance be in one year?
$975
Hint:
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$772.50


$22.50
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$750.00
Hint:
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Question 3 Explanation:
Awesome work! To calculate the final balance, you can take the original amount you put in multiplied by 1 plus the interest rate: $750 x (1+0.03) = $750 x 1.03 = $772.50
There are 3 questions to complete.
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Quiz: Time Value of Money