The present value of $1 to be paid 10 years in the future will increase with the interest rate.

Question

Quizplus · Accepted Answer

The present value of $1 to be paid in the future decreases with the interest rate. This is due to the time value of money, which states that money is worth more now than the same amount of money in the future. As the interest rate increases, the present value of future money decreases because there are more attractive investment options available in the present that can earn a higher return.

The Present Value of $1 to Be Paid 10 Years