Question: The higher the interest rate, the lower the present value of a future amount. Why?

The higher the interest rate, the lower the present value of a future amount. Why?

Step by Step Solution

★★★★★

3.35 Rating (161 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

Present values are less when discount rates are high as compared to when th... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

75-B-A-L (1070).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Q:

What is meant by the present value of a future amount? What is the general equation for present value?

Q:

How is the present value of a future payment calculated?

Q:

As the discount rate increases, the present value of a given future cash flow also increases. Do you agree? Explain.

Q:

The interest rates remain between 5% to 10% that is the general rate offered by most of the banks for business loans. In modern finance, time-value-of-money concepts play a central role in decision...

Q:

The interest rates remain between 5% to 10% that is the general rate offered by most of the banks for business loans. In modern finance, time-value-of-money concepts play a central role in decision...

Q:

The higher the interest rate, the lower the present value of a future amount. Why?

Q:

The higher the interest rate, the lower the present value of a future amount? Why?

Q:

1)The higher the interest rate: the greater the present value of a future amount. the smaller the present value of a future amount. the greater the level of inflation. None of the statements...

Q:

The higher the interest rate the greater the present value of a future amount. True or False?

Q:

Your inheritance will pay you $100,000 a year for five years beginning now. You can invest it in a CD that will pay 7.75 percent annually. What is the present value of your inheritance? (Round to the...

Q:

The Kollar Company has a defined benefit pension plan. Pension information concerning the fiscal years 2018 and 2019 are presented below ($ in millions): Information Provided by Pension Plan Actuary:...

Q:

Fluid Dynamic clear writing and ateps 9. On a given day, a barometer at the base of the Washington Monument reads 29.97 inches of mercury. What would the barometer reading be at an observation deck...

Q:

Multiple Choice 1 . 5 points QQAG just announced vesterday that its fourth quarter earnings will be 3 5 % higher than last year's fourth quarter. You observe that QQAG had an abnormal return of - 1 ....

Q:

18. In Case Study 10.1, we learned how psychologists relied on twins to measure the contributions of heredity to various traits. Suppose a study were to find that identical (monozygotic) twins had...

Q:

Write a report to the CEO of Borders Books and Music recommending specific benchmark measures. Include specific competitors against which to measure.

Q:

Garnet Electronics discloses to you that it uses a balanced scorecard with the following performance measures: Profit Training hours Percentage of defects Employee turnover Customer satisfaction...

Q:

Garnet Electronics discloses to you that it uses a balanced scorecard with the following performance measures: Profit Training hours Percentage of defects Employee turnover Customer satisfaction...

Q:

An article in Obesity Research "Impaired pressure natriuresis in obese youths," (2003, Vol. 11, pp. 745-751) described a study in which all meals were provided for 14 lean boys for three days...

Q:

Indicate whether the sentence or statement is true or false. 1.Traditional definitions of a small business center around defining a business along functional lines, or according to a firms operating...

Q:

(lumen 3 not yet answered Marked on] or I 00 p Flag question The regression results below are for data on 'Bahy's Einhweight (kg)\Question 4 The regression results below are for data on "Studying...