The future value of money is greater than the present value of money thanks to:

a. Inflation.
b. Existence of collateral.
c. Payment of interest.
d. Default of principle.

1 answer

The correct answer is c. Payment of interest.

The future value of money is greater than the present value primarily because of the potential to earn interest on the money over time. This is a fundamental concept in finance, where the time value of money indicates that a sum of money now is worth more than the same sum in the future due to its potential earning capacity. Inflation (option a) can erode purchasing power, but the fundamental reason for the future value being greater is primarily due to the earning capacity through interest (option c).