The shorter the length of time between a present value and its corresponding future value,
A) the lower the present value, relative to the future value.
B) the higher the present value, relative to the future value.
C) the higher the interest rate used in the present-valuation.
D) none of these.

Question

Quizplus · Accepted Answer

The shorter the time period between present value and future value, the less time there is for interest to accumulate on the present value. Therefore, the present value needs to be higher to reach the same future value, so the answer is B. Choices A and C are not accurate statements about the relationship between time and present value.

The Shorter the Length of Time Between a Present Value