Why Is the Present Value of an Amount to Be

question 31

Multiple Choice

Why is the present value of an amount to be received (paid) in the future less than the future amount?

• A)Deflation causes investors to lose purchasing power when their dollars are invested for greater than one year.
• B)Investors have the opportunity to earn positive rates of return, so any amount invested today should grow to a larger amount in the future.
• C)Investments generally are not as good as those who sell them suggest, so investors usually are not willing to pay full face value for such investments, thus the price is discounted.
• D)Because investors are taxed on the income received from investments they never will buy an investment for the amount expected to be received in the future.
• E)None of the above is a correct answer.

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Definitions:

Earnings

The financial gains obtained from labor, investment, or business operations, typically measured over specific periods.

Applicants

Individuals who apply or express interest in a job, program, or opportunity, seeking to become candidates for selection.

HRISs

Human Resource Information Systems, digital solutions for managing an organization's people-related data and processes.

Technological Effect

The impact of technology on society, including changes in behaviour, efficiency, and economic structures.