If an investor prefers the present value of an investment to its future value:
A)he has selected an interest rate that is too high.
B)he has selected an interest rate that is too low.
C)he has a zero time value of money.
D)None of the above

Question

Quizplus · Accepted Answer

This is because the present value of an investment is influenced by the interest rate. If the investor prefers the present value over the future value, it means that they value the money now more than they would value it in the future. This suggests that the interest rate used to discount future cash flows was too low, resulting in a present value that is lower than the investor's valuation of the investment. Hence, they would prefer present cash flows over future cash flows. Therefore, the investor has selected an interest rate that is too low.

If an Investor Prefers the Present Value of an Investment