The present value of a future amount depends on two variables: the interest rate and the number of periods.

Question

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The present value of a future amount is determined by discounting the future amount back to the present using a specific interest rate over a certain number of periods. This process accounts for the time value of money, indicating that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

The Present Value of a Future Amount Depends on Two