Which of the following statements is true?
A)Everything else remaining unchanged, higher the future value of an investment, higher will be the present value.
B)Everything else remaining unchanged, higher the rate of discount on an investment, higher will be the present value.
C)The future value of an investment is unrelated to the principal amount invested.
D)The future value of an investment is unrelated to the ongoing rate of interest.

Question

Which of the following statements is true?
A)Everything else remaining unchanged, higher the future value of an investment, higher will be the present value.
B)Everything else remaining unchanged, higher the rate of discount on an investment, higher will be the present value.
C)​The future value of an investment is unrelated to the principal amount invested.
D)​​The future value of an investment is unrelated to the ongoing rate of interest.

Quizplus · Accepted Answer

A higher future value of an investment, assuming all other factors remain constant, indicates a higher present value because the present value is essentially the future value discounted back to the present time. The relationship between present value and future value is inversely related to the rate of discount: as the discount rate increases, the present value decreases, and vice versa. Statements B, C, and D are incorrect because a higher rate of discount actually decreases the present value, and both the principal amount and the rate of interest directly affect the future value of an investment.

Which of the Following Statements Is True