For any specific number of periods,the present value factor decreases as the discount rate increases.

Question

Quizplus · Accepted Answer

The present value factor is the factor by which a future cash flow needs to be multiplied in order to calculate its present value. As the discount rate increases, the present value factor decreases because the higher discount rate means that the future cash flows are being discounted back to their present value by a larger amount. Therefore, Option A is correct.

For Any Specific Number of Periods,the Present Value Factor Decreases