The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum investment at Time 0 and (2) the smaller the present value of a given lump sum to be received at some future date. a. True b. False

The statement being described is based on the Time Value of Money. Based on this principle, the statements that "The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum investment at Time 0 and (2) the smaller the present value of a given lump sum to be received at some future date" are;

The time value of money is based on the notion that money at hand is more valuable than money promised.

The first statement says that when the future value of money will have greater value when compounded continually within a year.

The second statement shows that money received at a later time cannot grow in value therefore it has smaller value.

Imagine that you are told to choose between $55 now and $55 in a year. It is better to have the money now because it can be invested to yield returns which will increase it compared to when you receive the $55 in cash the next year.

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False

Explanation:

Compound interest refers to the interest charged on both the amount borrowed and previous interest

The greater the number of compounding periods within a year, then (1) the future value of a lump sum investment at Time 0 not necessarily is greater and (2) the present value of a given lump sum to be received at some future date not necessarily is smaller.

Therefore, the given statement is false.

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