When computing a present value, which of the following is TRUE?
A) You should adjust the discount rate to match the interval between cash flows.
B) You should adjust the future value to match the present value.
C) You should adjust the time period to match the present value.
D) You should adjust the cash flows to match the time period of the discount rate.

Question

Quizplus · Accepted Answer

When computing a present value, you should adjust the discount rate to match the interval between cash flows. This is because the discount rate represents the required rate of return for the time period of the cash flows. If the cash flows are occurring at different intervals, then the discount rate should be adjusted accordingly to reflect the time value of money for each interval.

When Computing a Present Value, Which of the Following Is