While the present value of an amount is decreased by an increase in the frequency of compounding, the present value of an annuity is increased.

Question

Quizplus · Accepted Answer

The present value of an amount increases with an increase in the frequency of compounding, as it represents the current worth of a future sum of money or stream of cash flows given a specified rate of return. Conversely, the present value of an annuity decreases with an increase in the frequency of compounding, as more frequent compounding periods lead to a higher effective interest rate, reducing the present value of future payments.

While the Present Value of an Amount Is Decreased by an Increase