Asked by Cameron Lopez on May 27, 2024
Verified
The present value of a payment of $500 to be made two years from today is greater if the interest rate is 7% than if it is 6%.
Present Value
The present value of a future amount of money or series of cash flows at a given rate of return.
Interest Rate
The percentage at which interest is paid by a borrower for the use of money they borrow from a lender.
- Understand the connection between interest rates and the concepts of present and future value.
- Understand how interest rates influence the present value of upcoming payments.
Verified Answer
CB
Chaylee BentleyJun 01, 2024
Final Answer :
False
Explanation :
The present value of a future payment decreases as the interest rate increases, because a higher rate means a greater discount is applied to the future payment.
Learning Objectives
- Understand the connection between interest rates and the concepts of present and future value.
- Understand how interest rates influence the present value of upcoming payments.