The expected value of a future payment differs from the present discounted value in that the expected value
A)Takes into account the possibility of nonpayment.
B)Uses a lower interest rate in its calculation.
C)Uses a higher interest rate in its calculation.
D)Assumes that future payments take place over a longer period of time.

Question

Quizplus · Accepted Answer

The expected value takes into account the possibility of nonpayment, while the present discounted value assumes that the payment will definitely be made.

The Expected Value of a Future Payment Differs from the Present