When dealing with present value a lower interest rate A Does

When dealing with present value, a lower interest rate:

A: Does not affect the present value of the future amount

B: Increases the present value of a future amount

C: Decreases the present value of a future amount

D: None of the statements associated with this question are correct

Solution

B: Increases the present value of a future amount

Below example will prove

FV =110 , interest rate = 10%, N=1

PV = 110/1.1 = 100

interest rate reduced from 10% to 8%

PV = 110/1.08 = 101.85