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2. Why would the same stream of payments be more or less valuable during different time...

2. Why would the same stream of payments be more or less valuable during
different time periods?
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Answer #1

Answer - The value of the stream of payments over time depends upon the rate of inflation in the economy. This rate of inflation needs to be adjusted in these cash flows through the discounting and taking out the time value of money. Over the period of time , if the rate of interest increases due to inflation , the discounting factor will increase and the value of cash flow will decrease with time. If the inflation rate is less , interest rates will be lower. This will increase the value of the stream of the cash flows over time.

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