Finance - Time Value of Money

Question 1

RANDO QUESTION

Answer 1

For present value, the higher the interest or discount rate, the lower the present value of a future amount.
Since the higher the interest or discount rate, the more that is counted as interest, the less there is in present value.
For future value, the higher the interest rate, the greater the future value of a present amount. Since future value is computed as principal plus compounded interest, the higher the interest rate, the greater the amount of interest earned each period and, therefore, the greater the accumulated future amount.