Question

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

A)

decreases.

B)

changes proportionally.

C)

increases.

D)

remains unchanged.

Answer 1

The present value interest factor decreases as the length of time until receipt of the funds increases.

Step-by-step explanation:

The correct answer is A) decreases.

The present value interest factor (PVIF) is a factor used in finance to calculate the present value of a future sum of money. It takes into account the interest rate and the length of time until the funds are received.

As the length of time until receipt of the funds increases, the present value interest factor decreases. This is because the longer the period, the more the future sum is discounted to its present value due to the time value of money.