When the maximum amount of interest is paid on a loan, the present value of the cost of the investment exceeds the initial cost of the investment.

Question

Quizplus · Accepted Answer

The present value of the cost of the investment, including interest, represents the current worth of all future payments made for the investment. If the maximum amount of interest is paid, it increases the total cost over time, but the present value is a way to compare the total cost to the initial cost at a single point in time, typically not exceeding the initial cost when considering the time value of money.

When the Maximum Amount of Interest Is Paid on a Loan