A Given Future Value of Money Would Have a Smaller

question 263

Multiple Choice

A given future value of money would have a smaller present value if

• A)the interest rate used in discounting is higher.
• B)the length of time over which it is "discounted" is shorter.
• C)the interest rate is zero.
• D)there is no compounding of interest.

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Definitions:

Expected Return

The anticipated amount of gain or loss that an investor can expect from an investment, based on historical or projected returns.

Real Return

The profit or loss on an investment adjusted for inflation, reflecting the actual purchasing power of the return.

Small U.S. Stocks

Refers to shares in small-cap companies based in the United States, typically characterized by a small market capitalization.

Long-Term U.S. Treasury Bonds

Bonds issued by the U.S. government with a maturity of typically 20 or 30 years, considered to be one of the safest long-term investments.