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Natasha2012 [34]
3 years ago
6

All else constant, explain why the present value decreases as the discount rate increases.

Business
1 answer:
CaHeK987 [17]3 years ago
6 0

<span>A rise in the discount rate cuts the present value factor and the present value. This is for the reason that a higher interest rate means you would have to set a smaller amount aside today to earn a specified amount in the future. A decrease in the time period increases the present value factor and increases the present value. In other words, when you earn more interest, you can capitalize less money today to have the same amount at a given point in the future.</span>

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