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Money has a time value chiefly because a sum available today can

  • A.be invested to earn a return
  • B.be spent more cheaply than later
  • C.be counted more accurately than a future sum
  • D.be taxed at a lower rate than a future sum

Answer: A

The opportunity to put the money to work is what makes a rupee today worth more than a rupee next year, and it holds quite apart from inflation or any risk of default. Interest is simply the price paid for that opportunity to change hands.

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