For a given period of time until receipt of the funds, as the interest rate increases, the present value interest factor
A) changes proportionally.
B) increases.
C) decreases.
D) remains unchanged.

Question

Quizplus · Accepted Answer

The present value interest factor is used to calculate the present value of an expected cash flow at a given interest rate. As the interest rate increases, each dollar received in the future is worth less in present value terms. Therefore, the present value interest factor decreases.

For a Given Period of Time Until Receipt of the Funds