The present value of $1,000 received three years from today with a discount rate of 10% is less than the present value of a $500 annuity with the same discount rate over the same period.
The three-year annuity represents three payments of $500 (= $1,500),so the present value of the annuity is greater.

Question

Quizplus · Accepted Answer

The present value of a single future payment is typically less than the present value of an annuity with multiple payments, assuming the same discount rate and time period, because the annuity involves multiple cash flows that are each discounted back to the present.

The Present Value of $1,000 Received Three Years from Today