You have been promised a payment of $400 in the future.In which case is the present value of this payment highest?
A) You receive the payment 4 years from now and the interest rate is 4 percent.
B) You receive the payment 4 years from now and the interest rate is 5 percent.
C) You receive the payment 5 years from now and the interest rate is 4 percent.
D) You receive the payment 5 years from now and the interest rate is 5 percent.

Question

Quizplus · Accepted Answer

The present value is highest when the interest rate is lowest and the time period is shortest. Option A has the lowest interest rate and shortest time period among the choices.

You Have Been Promised a Payment of $400 in the Future.In