The present value of a payment to be made in the future falls as
A)the interest rate rises and the time until the payment is made increases.
B)the interest rate rises and the time until the payment is made decreases.
C)the interest rate falls and the time until the payment is made increases.
D)the interest rate falls and the time until the payment is made decreases.

Question

Quizplus · Accepted Answer

The present value decreases when the interest rate increases and when the time until the payment is made increases, as both factors reduce the present value of future cash flows.

The Present Value of a Payment to Be Made in the Future