The present value of a single future sum of money is inversely related to both the number of years until payment is received and the discount rate.

Question

Quizplus · Accepted Answer

This statement is a correct representation of the time value of money concept, which states that the value of money decreases over time due to inflation and the opportunity cost of investing the funds elsewhere. The longer the time period until receipt, the lower the present value of the future sum, and the higher the discount rate, the lower the present value as well.

The Present Value of a Single Future Sum of Money