Present value:
A) is always greater than the future value of money.
B) does not account for inflation.
C) is how much an amount of money obtained in the future is worth today.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

Present value is the current value of a future sum of money, taking into account a specified interest rate, and is therefore the amount that the future sum of money is worth today. It does take into account inflation by factoring in the time value of money through an interest rate. Option A is incorrect because future value could be greater than the present value depending on the interest rate and time period. Option B is incorrect since the present value calculation does account for inflation through the interest rate used in the formula.

Present Value