Which statement best describes the concept of "Time Value of Money"?

The concept of "Time Value of Money" is fundamentally based on the premise that money available today is worth more than the same amount in the future. This principle is grounded in the idea that money can earn interest or generate returns over time, making current funds more valuable.

When you have a dollar today, you can invest it or use it to generate additional income, leading to a greater total value in the future. Conversely, a dollar received in the future would not have the same purchasing power or investment potential as that same dollar today, considering factors such as inflation and interest rates.

This understanding is essential for making informed financial decisions, such as evaluating investment opportunities, understanding loan costs, or planning for future expenses. The correct response highlights that present value is greater than future value, aligning precisely with the core principle of the Time Value of Money.