As the discount rate increases, the present value of $500 to be received six years from now:

A) Remains constant.
B) Also increases.
C) Decreases.
D) Becomes negative.
E) Will vary but the direction of the change is unknown.

Question

Mozhdeh Dorraji · Accepted Answer

Final Answer : C, Explanation :  The present value of a future amount decreases as the discount rate increases, because a higher discount rate means future cash flows are discounted more heavily, reducing their present value.

As the discount rate increases, the present value of $500 to be received six years from now:

A) Remains constant.
B) Also increases.
C) Decreases.
D) Becomes negative.
E) Will vary but the direction of the change is unknown.

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Learning Objectives

Related questions

As the discount rate increases, the present value of $500 to be received six years from now:A) Remains constant.B) Also increases.C) Decreases.D) Becomes negative.E) Will vary but the direction of the change is unknown.

Definitions

Learning Objectives

Learning Objectives

Related questions

As the discount rate increases, the present value of $500 to be received six years from now:

A) Remains constant.
B) Also increases.
C) Decreases.
D) Becomes negative.
E) Will vary but the direction of the change is unknown.