Question

Thus, if a and b are both correct and you do not put both of these or you include one of the other choices, you will receive 0 points). An increase in the lump sum amount (for example, from $500 to $700). An decrease in the number of compounding periods per year (for example, the compounding changes from four times per year to one time per year). An increase in N A decrease in the lump sum amount (for example, from $700 to $500). An increase in the number of compounding periods per year (for example, the compounding changes from one time per year to 12 times per year). A decrease in the interest rate A decrease in N An increase in the interest rate Previous Page Next Page Page 5 of 30

Answer 1

Present value = future value / (1 + (r/n))^n*N,

where r = interest rate per year,

N = number of years

and n = number of compounding periods per year.

Therefore, the following will decrease present value :

• An increase in N
• A decrease in the lump sum amount
• An increase in the number of compounding periods per year
• An increase in the interest rate