You've been promised a payment of $400 in the future.In which case is the present value of this payment highest?
A)you wait 4 years and the interest rate is 4%
B)you wait 4 years and the interest rate is 5%
C)you wait 5 years and the interest rate is 4%
D)you wait 5 years and the interest rate is 5%

Question

Quizplus · Accepted Answer

The present value of a future payment decreases as the time period increases and as the interest rate increases. Therefore, the present value will be highest in option A where you wait for only 4 years and the interest rate is lower (4%) compared to the other options.

You've Been Promised a Payment of $400 in the Future