Which one of the following will increase the present value of an annuity, other things equal?
A)increasing the interest rate
B)decreasing the interest rate
C)decreasing the number of payments
D)decreasing the amount of the payment

Question

Quizplus · Accepted Answer

Decreasing the interest rate increases the present value of an annuity because the discount factor is inversely related to the interest rate. Lower interest rates result in a smaller discount factor, which in turn increases the present value of future cash flows.

Which One of the Following Will Increase the Present Value