The present value of a future sum increases as either the discount rate or the number of periods per year increases, other things held constant.

Question

Quizplus · Accepted Answer

The present value of a future sum decreases as either the discount rate increases or the number of periods per year increases, assuming other factors remain constant. This is because a higher discount rate or more frequent compounding periods both result in a higher effective discounting effect on the future sum, reducing its present value.

The Present Value of a Future Sum Increases as Either