For positive interest rates, the present value interest factor is
A) between 2.0 and 0.0.
B) always negative.
C) always less than 1.0.
D) a discount rate.

Question

Quizplus · Accepted Answer

The present value interest factor (PVIF) is the factor by which a future cash flow needs to be multiplied to obtain its present value. For positive interest rates, the PVIF will always be less than 1.0 as the cash flow is being discounted back to the present. Therefore, choice C is correct. Choices A and B are incorrect as the PVIF cannot be negative or greater than 2.0. Choice D is incorrect as the PVIF is not a discount rate, but rather a factor used in the present value calculation.

For Positive Interest Rates, the Present Value Interest Factor Is