Which of the following will reduce present value, holding all else equal? (I) An increase in...

Which of the following will reduce present value, holding all else equal?

(I) An increase in the number of holding periods

(II) A decrease in future value

(III) An increase in the interest rate

Group of answer choices

(I), (III)

(III)

None of the above

(I)

(I), (II), (III)

(I), (II)

Solutions

Expert Solution

Answer:

The correct answer is (I), (II), (III) as no. Of holding period,future value and interest rate are variables that use in Calculation of present value.

Further,no. Of holding period and interest rate are inversely related to present value.It means that increase in these two variable will decrease the present value and vice versa.Future value and present value are directly related,it means that decrease in future value result in decrease in present value.

jeff jeffy answered 2 years ago

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