The Present Discounted Value of a Future Payment Becomes Smaller

question 32

Multiple Choice

The present discounted value of a future payment becomes smaller when:

• A) the payment itself decreases.
• B) the real interest rate decreases.
• C) the payment itself increases.
• D) the nominal interest rate decreases.
• E) the payment is made sooner rather than later.

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Definitions:

Vendors

Businesses or individuals that sell goods and services.

Double-Entry Bookkeeping System

An accounting system where every entry to an account requires a corresponding and opposite entry to a different account, ensuring the accounting equation remains balanced.

Single-Entry System

An accounting method where each financial transaction is recorded only once, either as an expense or income, making it simpler but less comprehensive than double-entry systems.

Cash Flow

The total amount of money being transferred into and out of a business, affecting its liquidity, solvency, and overall financial health.