Which of the following will not cause a decrease in the present value of a sequence of payments?
A) An increase in a future expected payment.
B) A decrease in a future expected payment.
C) An increase in the current interest rate.
D) A decrease in the current payment.
E) An increase in expected future interest rates.

Question

Quizplus · Accepted Answer

An increase in a future expected payment would cause an increase in the present value of a sequence of payments, as there would be more cash flow to discount back to the present. Decreases in future expected payments and increases in expected future interest rates would both cause a decrease in the present value of a sequence of payments. An increase in the current interest rate would also cause a decrease in the present value of a sequence of payments, as it would increase the discount rate used to calculate present value. A decrease in the current payment would also cause a decrease in the present value of a sequence of payments, as there would be less cash flow to discount back to the present.

Which of the Following Will Not Cause a Decrease in the Present