Asked by Julia Little on May 01, 2024
Verified
The higher the rate of interest:
A) the larger the present value of a future sum of money.
B) the smaller the future value of an amount invested today.
C) the smaller the present value of a future sum of money.
D) All of the above
Interest Rate
The cost of borrowing money or the return on invested funds, typically expressed as a percentage.
Present Value
The immediate worth of a future lump sum or successive cash inflows, considering a specific return rate.
Future Sum
The projected amount of money or value at a specific future date, usually factoring in variables such as interest rates and time periods.
- Detail the influence of interest rates on present and forthcoming financial valuations.
Verified Answer
JR
Janet ReyesMay 07, 2024
Final Answer :
C
Explanation :
The higher the rate of interest, the smaller the present value of a future sum of money, because a higher discount rate is used to calculate present value, reducing its amount.
Learning Objectives
- Detail the influence of interest rates on present and forthcoming financial valuations.