Question

Which has the greater present value if interest rates are positive? Select one: a. $5,000 due in 3 years b. $10,000 due in 5 years c. $5,000 due in 5 years d. $10,000 due in 3 years.

Answer 1

The correct answer is Option D " 10,000 Due in 3 Years"

The Present Value refers to the value of the future cash flows as on today. When the period is longer the present value will be less as the discounting will be greater similarly the project which has shorter period tends to have higher present value as the discounting will be less.

Among the gievn option available, The Option which has highest amount and shortest period will have largerst present value.