The present value of $1,000 received three years from today with a discount rate of 10% is less than the present value of a $500 annuity with the same discount rate over the same period.

Question

Quizplus · Accepted Answer

The present value of a single future payment of $1,000 is calculated using the formula PV = FV / (1 + r)^n, which results in a lower value than the present value of an annuity of $500 received each year for three years, as the annuity involves multiple payments that are each discounted separately.

The Present Value of $1,000 Received Three Years from Today