Question

The present value of a single sum:

Group of answer choices

increases as the discount rate decreases

increases as the discount rate increases

increases as the number of discount periods increases

increases as the number of discount periods increases and as the discount rate decreases

Answer 1

The present value is calculated as-

Present value = future value x ( 1 + discount rate)^n

Hence, if the discount rate increases the present value will fall and if the discount rate reduces, the present value will increase. Also, if thenumber of discount periods increase the present value falls and if the periods reduce, the present value increases.

Answer- Increases as the discount rate decreases.

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