About the discount factors used to value the cash flows

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Reference no: EM131444254

Suppose you are trying to find the present value of two different cash flows using the same interest rate for each cash flow. One is $2,000 twenty years from now, the other a $1,600 flow fourteen years from now. Which of the following is true about the discount factors used to value the cash flows?

1) The discount factor for the cash flow twenty years away is always less than or equal to the discount factor for the cash flow that is received fourteen years from now

2) Both discount factors are greater than 1

3) Regardless of the interest rate, the discount factors are such that the present value of the $2,000 will always be higher than the present value of the $1,600

4) Since the payments are different, no statement can be made regarding the discount factors to be used

Reference no: EM131444254

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