Increasing the number of periods will increase all of the following except
A) the present value of an annuity.
B) the present value of $1.
C) the future value of $1.
D) the future value of an annuity.

Question

Quizplus · Accepted Answer

The present value of $1 decreases as the number of periods increases, because the value of $1 received in the future is worth less today the further into the future it is received. This is due to the time value of money principle, where a dollar today is worth more than a dollar in the future due to its potential earning capacity. Increasing the number of periods means the $1 is received further in the future, thus its present value decreases.

Increasing the Number of Periods Will Increase All of the Following