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Time Value of Money Interview Questions & Answers - Learning Mode

Time Value of Money Interview Questions & Answers - Learning Mode

The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.TVM is based on the concept that money received earlier is worth more than the same amount of money received later, because it can be 'employed' to earn interest over time.The time value of money tells us that receiving cash today is more valuable than receiving cash in the future.

Try Time Value of Money Interview Questions & Answers - Exam Mode


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Time Value of Money Interview Questions & Answers - Learning Mode
Try Time Value of Money Interview Questions & Answers - Exam Mode
Question: What is the difference between compounding technique and discounting technique?

Answer: 1.In the compounding technique appreciated value of a rupee is calculated accordingly future value is determined, whereas in discounting technique, today's value is calculated for a given future cash flow at a particular period of time at a specified rate of interest.
2. Compounding techniques work under forwarding approach, discounting techniques works under backward approach. Source:
Question: What is doubling period?

Answer: It refers to the method in which a particular sum of money is doubled in a definite period of time at a specified at a specified rate of interest. In other words, the length of the period with which an amount is going to double up at a certain given rate of interest. This is calculated by using the following two formulas:
1. Rule 72:-
Doubling Period= 72/Rate of interest
2. Rule 69:-
Doubling Period= 0.35+ 69/Rate of interest
Question: What is an annuity?

Answer: An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase. It is also referred as cash flows of a certain period of time.

Question: What is a bond?

Answer: A written and signed promise to pay a certain sum of money on a certain date, or on fulfillment of a specified condition. All documented contracts and loan agreements are bonds. It is also referred as a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

Question: What is time value of money?

Answer: Time value of money refers to that "Time has got a value".Time Value of Money is a concept that recognizes the relevant worth of future cash flows arising as a result of financial decisions by considering the opportunity cost of funds.The time value of money tells us that receiving cash today is more valuable than receiving cash in the future. Source:
Question: What is present value technique or discounting technique?

Answer: In present value technique today's value is calculated for a given period of time at a specified rate of interest. Discounting techniques works under forwarding approach. Many business decisions are taken by using present value technique. Source:
Question: Name the techniques of time value of money.

Answer: a)Compounding Technique
b)Discounting Techniue Source:
Question: What is compounding technique?

Answer: It is a technique under which a future sum of money is calculated for a given period of time at a specified rate of return.Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings. Also known as "compound interest". Source:


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Latest 20 Questions
Payment of time- barred debt is: (a) Valid (b) Void (c) Illegal (d) Voidable
Consideration is defined in the Indian Contract Act,1872 in: (a) Section 2(f) (b) Section 2(e) (c) Section 2(g) (d) Section 2(d)
Which of the following is not an exception to the rule, "No consideration, No contract": (a) Natural love and affection (b) Compensation for involuntary services (c) Completed gift (d) Agency
Consideration must move at the desire of: (a) The promisor (b) The promisee (c) The promisor or any other party (d) Both the promisor and the promisee
An offer which is open for acceptance over a period of time is: (a) Cross Offer (b) Counter Offer (c) Standing Offer (d) Implied Offer
Specific offer can be communicated to__________ (a) All the parties of contract (b) General public in universe (c) Specific person (d) None of the above
_________ amounts to rejection of the original offer. (a) Cross offer (b) Special offer (c) Standing offer (d) Counter offer
A advertises to sell his old car by advertising in a newspaper. This offer is caleed: (a) General Offer (b) Special Offer (c) Continuing Offer (d) None of the above
In case a counter offer is made, the original offer stands: (a) Rejected (b) Accepted automatically (c) Accepted subject to certain modifications and variations (d) None of the above
In case of unenforceable contract having some technical defect, parties (a) Can sue upon it (b) Cannot sue upon it (c) Should consider it to be illegal (d) None of the above
If entire specified goods is perished before entering into contract of sale, the contract is (a) Valid (b) Void (c) Voidable (d) Cancelled
______________ contracts are also caled contracts with executed consideration. (a) Unilateral (b) Completed (c) Bilateral (d) Executory
A offers B to supply books @ Rs 100 each but B accepts the same with condition of 10% discount. This is a case of (a) Counter Offer (b) Cross Offer (c) Specific Offer (d) General Offer
_____________ is a game of chance. (a) Conditional Contract (b) Contingent Contract (c) Wagering Contract (d) Quasi Contract
There is no binding contract in case of _______ as one's offer cannot be constructed as acceptance (a) Cross Offer (b) Standing Offer (c) Counter Offer (d) Special Offer
An offer is made with an intention to have negotiation from other party. This type of offer is: (a) Invitation to offer (b) Valid offer (c) Voidable (d) None of the above
When an offer is made to the world at large, it is ____________ offer. (a) Counter (b) Special (c) General (d) None of the above
Implied contract even if not in writing or express words is perfectly _______________ if all the conditions are satisfied:- (a) Void (b) Voidable (c) Valid (d) Illegal
A specific offer can be accepted by ___________. (a) Any person (b) Any friend to offeror (c) The person to whom it is made (d) Any friend of offeree
An agreement toput a fire on a person's car is a ______: (a) Legal (b) Voidable (c) Valid (d) Illegal
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