You have been promised a payment of $250,000 in the future.In which case is the present value of this payment highest?
A)You receive the payment 3 years from now and the interest rate is 8 percent.
B)You receive the payment 3 years from now and the interest rate is 6 percent.
C)You receive the payment 2 years from now and the interest rate is 8 percent.
D)You receive the payment 2 years from now and the interest rate is 6 percent.

Question

Quizplus · Accepted Answer

The present value is highest when the payment is received sooner and the interest rate is lower. Option D has the shortest time (2 years) and the lowest interest rate (6 percent).

You Have Been Promised a Payment of $250,000 in the Future.In