The present value of a future amount will decrease if _________________.
I.the discount rate increases
II.the amount occurs closer in time
III.the compounding frequency increases
IV.inflation increases
A)I and II only
B)I and III only
C)II and III only
D)III and IV only
E)I, III and IV only

Question

Quizplus · Accepted Answer

The present value decreases when the discount rate increases (I) and when the compounding frequency increases (III). Inflation increasing (IV) typically leads to a higher discount rate, which also decreases present value.

The Present Value of a Future Amount Will Decrease If