Answer (A) is correct . The time value of money is concerned with two issues: (1) the investment value of money, and (2) the risk (uncertainty) inherent in any executory agreement. Thus, a dollar today is worth more than a dollar in the future, and the longer one waits for a dollar, the more uncertain the receipt is. The cost of capital involves a specific application of the time value of money principles. It is not a basic concept thereof.
Answer (B) is incorrect because Risk is a basic time value of money concept. Cost of capital is not.
Answer (C) is incorrect because The interest effect is a basic time value of money concept.
Answer (D) is incorrect because The interest effect and risk are basic time value of money concepts. Cost of capital is not.
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