Why does a lower discount rate affect present values

Reference no: EM133341585

Questions:

a. Find the present value of a promise to pay $1000 in two years at a discount rate of 10 percent.

b. Find the present value of a promise to pay $1000 for the next 100 years (starting next year) at a discount rate of 10 percent.

c. What would happen to your answers to parts (a) and (b) if the discount rate were 5 percent? Why does a lower discount rate affect present values in this way?

Reference no: EM133341585

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