All else being the same, which of the following statements is correct?
A) Present values increase as the discount rate increases I only.
B) Present values decrease as the discount rate decreases.
C) Present values increase the further away in time the future value.
D) Present values are always smaller than future values when both r and t are positive.
E) Present values are always smaller than future values when r is negative and t positive.

Question

Quizplus · Accepted Answer

Present values are calculated by discounting future values back to the present using a discount rate (r). When both the discount rate (r) and the time period (t) are positive, the present value will indeed be smaller than the future value. This is because the process of discounting reduces the future value to account for the time value of money.

All Else Being the Same, Which of the Following Statements