The present value of a future amount of money will be SMALLER the:
closer in the future the money is and the smaller the interest rate. more distant the money and the smaller the interest rate. closer the money and the larger the interest rate. the more distant the money and the larger the interest rate.
You give $100 to a nephew for his birthday. Your sister gives him a certificate that will pay $105 a year from now but cannot be redeemed before them. Your mother gives him a $1200 interest-free loan for one year. If the interest rate is 8%, who has given him the most and least valuable gifts?
Your gift is most valuable, your mother's gift least valuable. Your gift is most valuable, your sister's gift least valuable. Your sister's gift is most valuable, your mother's gift least valuable. Your mother's gift is most valuable, your gift least valuable. Your mother's gift is most valuable, your sister's gift least valuable.
