Because we usually assume positive interest rates in time value analyses,the present value of a three year annuity will always be less than the future value of a single lump sum,if the annuity payment equals the original lump sum investment.

Question

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The statement is incorrect. The present value of a three-year annuity may be greater than the future value of a single lump sum investment, depending on the interest rate and the size of the payments. This is known as an annuity due to its timing of payments. It is essential to consider the interest rate, the number of payments, and the payment size while computing the present value of an annuity.

Because We Usually Assume Positive Interest Rates in Time Value