How will the present value of a future amount be affected if the interest rate is lowered.
A)The present value will increase
B)The present value will decrease
C)The present value will not change
D)Must know the amount of the future value before this can be answered

Question

Quizplus · Accepted Answer

If the interest rate is lowered, the present value will increase. This is because a lower interest rate means that less return would be earned on the investment, which would require a higher initial investment amount to reach the same future value. Therefore, a lower interest rate will increase the amount of money needed to reach the same future value, translating to a higher present value.

How Will the Present Value of a Future Amount Be