Given Some Amount to Be Received Several Years in the Future,if

question 123

Multiple Choice

Given some amount to be received several years in the future,if the interest rate increases,the present value of the future amount will

• A) Be higher.
• B) Be lower.
• C) Stay the same.
• D) Cannot tell.
• E) Be variable.

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Definitions:

Future Value

The estimated amount of money an investment is expected to be worth in the future, taking into account a specified rate of interest or growth.

Annuity Due

A type of annuity in which payments are made at the beginning of each period, typically used in leases and rental agreements, resulting in higher present value compared to ordinary annuities.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, frequently used in the evaluation of investment opportunities.

Investment

An asset or item acquired with the goal of generating income or appreciation in value.