Asked by Donald R. Johnson on Jul 05, 2024
Verified
In the present value of an annuity table, the factors
A) increase as the interest rates increase
B) decrease as the periods increase
C) remain the same as the periods increase
D) decrease as the interest rates increase
Present Value
The current value of a future sum of money or stream of cash flows given a specified rate of return.
Interest Rates
The percentage of a loan amount charged by a lender to a borrower for the use of assets, varying with market conditions and credit risk.
- Understand the impact of interest rates on present and future values.
Verified Answer
JB
Jayla BunkleyJul 06, 2024
Final Answer :
D
Explanation :
The factors in the present value of an annuity table represent the present value of a series of equal payments made at regular intervals, and are calculated based on two inputs: the interest rate and the number of periods. As the interest rate increases, the present value of the annuity decreases, so the factors in the table must decrease as the interest rates increase. This means that choice D is the correct answer.
Learning Objectives
- Understand the impact of interest rates on present and future values.