$1,000 received 5 years from today discounted at an annual rate of 10% has a smaller present value than $1,000 received 10 years from today discounted at an annual rate of 5%.

Question

Quizplus · Accepted Answer

The present value of $1,000 received 5 years from today discounted at 10% is higher than the present value of $1,000 received 10 years from today discounted at 5%, because a higher discount rate (10% vs. 5%) applied over a shorter period (5 years vs. 10 years) reduces the present value less.

$1,000 Received 5 Years from Today Discounted at an Annual