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    tclough's Avatar
    tclough Posts: 2, Reputation: 1
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    #1

    May 21, 2012, 07:36 AM
    Present value
    You observe the present value of a future amount just fell this means

    A. The future amount just rose
    B. The interest or discount rate just fell
    C. The interest or discount rate just rose
    D. This must be a bad investment
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    May 21, 2012, 07:47 AM
    I suggest you start by writing down the formula that relates PV to FV and interest rate:



    For PV to fall either the numerator of the right hand side of this equation must decrease or the denominator must increase. Which of the choices A-D does that?
    arunavcd's Avatar
    arunavcd Posts: 89, Reputation: 3
    Junior Member
    		  
    #3

    May 28, 2012, 05:35 PM
    Quote Originally Posted by tclough View Post
    You observe the present value of a future amount just fell this means

    A. The future amount just rose
    B. The interest or discount rate just fell
    C. The interest or discount rate just rose
    D. This must be a bad investment

    Should be C here. But it does not necessarily mean that interest is the only factor. It might be tax changes too and possibly others.
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