Present value may be defined as:
A) future cash flows discounted to the present.
B) official prescribed price.
C) present cash flows compounded into the future.
D) the average of the bid and asked price.

Question

Quizplus · Accepted Answer

Present value is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted back to the present value to reflect the time value of money, which is the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Present Value May Be Defined As