Everything else equal, which of the following conditions will result in the lowest present value of an amount to be received in the future?
A)annual compounding
B)quarterly compounding
C)monthly compounding
D)daily compounding

Question

Quizplus · Accepted Answer

The more frequently compounding occurs, the higher the present value of an amount in the future. Daily compounding results in the highest present value, so having a lower frequency of compounding, such as annual, would result in the lowest present value. Therefore, D is the best choice as it is the option with daily compounding.

Everything Else Equal, Which of the Following Conditions Will Result