The present value of a future amount is:
A)that sum which if deposited today will grow into the future amount.
B)referred to as the discounted value of the future amount.
C)always smaller than the future amount, for positive interest rates.
D)All of the above

Question

Quizplus · Accepted Answer

All three options are correct statements about the present value of a future amount. Option A explains that the present value is the amount that needs to be deposited today to grow into the future amount. Option B defines present value as the discounted value of the future amount, which means the future amount is reduced by the interest rate or discount rate. Option C correctly states that the present value is always smaller than the future amount, assuming a positive interest rate as money today is worth more than the same amount in the future.

The Present Value of a Future Amount Is