What is defined as the value of a sum of money to be received or paid at a later date?

The correct answer, Future Value, refers to the concept in finance that determines the value of a sum of money at a specific date in the future, taking into account an expected rate of return or interest over time. This concept is important in various financial calculations where individuals or companies want to know how much a specific amount of money invested today will be worth at a later date due to compounding interest or investment growth.

Calculating Future Value enables investors and analysts to estimate the potential growth of investments, savings, or any cash flows that will occur in the future. For example, if you invest a certain amount today at a specified interest rate, Future Value helps you understand how much that investment will grow over time.

Understanding this concept assists in making informed decisions regarding investments, loans, and overall financial planning, as it focuses specifically on the growth potential of money over time.