Which of the following tables would show the smallest value for an interest rate of 5% for six periods?
A) Future value of 1
B) Present value of 1
C) Future value of an ordinary annuity of 1
D) Present value of an ordinary annuity of 1

Question

Quizplus · Accepted Answer

The present value of 1, at any positive interest rate, will always show the smallest value because it represents the current worth of a single unit of currency to be received in the future, discounted at the given interest rate for a certain number of periods. In this case, for an interest rate of 5% for six periods, the present value of 1 would be less than the future value of 1 or the value of an annuity, since it is essentially calculating how much less a dollar received in the future is worth today.

Which of the Following Tables Would Show the Smallest Value