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In analyzing present and future values of lump sums, the larger the interest rate and the larger the number of periods, the _________

Sagot :

Answer:

THE SMALLER THE PRESENT VALUE

Explanation:

The smaller is any future value.

The larger is any present value.

The smaller is any present value.

The smaller is any future value interest factor.

Let us illustrate with the following scenarios  

1. 500 is to be received in 2 years. Interest rate is 10%. Present value is 413.22

2. 500 is to be received in 2 years. Interest rate is 20%.  Present value is 347.22

3.  500 is to be received in 4 years. Interest rate is 10%. Present value is 341.51

It can be seen that the the larger the interest rate and the larger the number of periods

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