The present value of an investment will always be larger than its expected future value when interest is compounded.

Question

Quizplus · Accepted Answer

The present value of an investment will always be smaller than its expected future value when interest is compounded. This is because with compounding, the interest earned on the investment is added to the principal, resulting in the growth of the investment over time. Therefore, the longer the investment is held, the greater the expected future value will be.

The Present Value of an Investment Will Always Be Larger