Business Degree Certification Practice Test

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Prepare for your Business Degree Certification Test with our comprehensive quiz. Utilize flashcards, multiple choice questions, hints, and explanations to build your proficiency. Excel in your exam!

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What term refers to the value of an investment one year from today?

Future value
Present value
Principal amounts
Discounted value

The correct answer is: Future value

The term that refers to the value of an investment one year from today is known as future value. Future value represents the amount of money that an investment is expected to grow into after a specified period, taking into account interest rates or returns earned over time. This concept is essential for investors when planning their financial future, as it helps them understand how much an investment today will be worth at a later date. In contrast, present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. Principal amounts refer to the original sum of money invested or loaned, which does not account for the returns or interest that may accumulate over time. Discounted value, meanwhile, typically refers to the process of determining the present value of a future cash flow, applying a discount rate based on risk and time value of money. Understanding future value allows individuals and businesses to make informed decisions regarding their investment strategies and financial planning.