What happens to future value of a lump sum if you increase the length of time...

What happens to future value of a lump sum if you increase the length of time involved (for example, going from 5 years to 10 years)?A) No Change to the future valueB) Future value increases.C) Future value decreasesD) The PV becomes negative.

If the US T-Bill rate is 1.7%, the US expected inflation rate is 0.6%, the real rate of interest for Brazil is 2.2%, the default risk premium for Amazon is 0.9%, the maturity premium for Amazon debt is 1.2%, and the liquidity premium is 0.4%, then what is the expected interest rate (cost of capital) Amazon will have to pay to borrow?

The PVAF (present value annuity factor) is:

Expert Solution

Answer:

Answering question first as per Chegg's guidelines:

1.Process of Calculation of Future value of lump sum amount is compounding.Formula to calculate future value of lump sum amount is:

Future value=lump sum amount*compounding factor

Compounding factor increase with increased with the no. of years and consequently future value is increased.

Thus correct answer is option B.

jeff jeffy answered 2 years ago

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