Which of the following changes would decrease the present value of a future payment?
A)a decrease in the size of the payment
B)an increase in the time until the payment is made
C)an increase in the interest rate
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A decrease in the size of the payment means less money to be received in the future, which would decrease its present value. An increase in the time until the payment is made means a longer wait for the money to be received, which would also decrease its present value. An increase in the interest rate would increase the discount rate used to calculate the present value, which would also decrease the present value of the future payment. Therefore, all of these changes would decrease the present value of a future payment.

Which of the Following Changes Would Decrease the Present Value