The present value of a future sum decreases as either the discount rate or the number of periods per year increases, other things held constant.

Question

Quizplus · Accepted Answer

This statement is true according to the time value of money principle, where the farther into the future a sum of money is, the less valuable it is today. Therefore, as the discount rate (or interest rate) increases, the present value of a future sum will decrease. Additionally, increasing the number of periods per year will compound the interest more frequently, resulting in a smaller present value.

The Present Value of a Future Sum Decreases as Either