If your broker tells you that a trust to which you are a beneficiary has changed and instead of getting $5000 per year starting next year you will be getting $6000 per year but it will be starting the year after next the present value to you has
A)fallen.
B)risen.
C)remained unchanged.
D)might have either fallen or risen, depending on the interest rate.

Question

Quizplus · Accepted Answer

The present value of the future payments depends on the interest rate used to discount those payments. If the interest rate is relatively high, the delay in payments might reduce their present value despite the increase in the amount. Conversely, if the interest rate is low, the increase in the payment amount might offset the delay's impact, potentially increasing the present value. Therefore, without knowing the interest rate, it's impossible to determine definitively whether the present value has fallen or risen.

If Your Broker Tells You That a Trust to Which