To increase a given present value, the discount rate should be adjusted:
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A. B. C. D.B
The correct answer is A. Upward.
Present value is the value of a future amount of money discounted to reflect its current worth, based on a specified interest rate or discount rate. The discount rate is a rate at which the future cash flows are discounted to their present value.
If the discount rate is increased, the present value of future cash flows will decrease, and conversely, if the discount rate is decreased, the present value of future cash flows will increase. Therefore, to increase the present value of future cash flows, the discount rate should be adjusted upward, which will increase the discount factor used to calculate present value and, in turn, increase the present value.
In summary, increasing the discount rate increases the discount factor and decreases the present value, while decreasing the discount rate decreases the discount factor and increases the present value.