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Suppose that the discount rate used to calculate the present value of a debt obligation's cash flow is x % . Suppose also that the
Suppose that the discount rate used to calculate the present value of a debt obligation's cash flow is Suppose also that the only cash flows for this debt obligation are $ four years from now and $ five years from now. For which of these cash flows will the present value be greater?
A The present values would only be different if the debt obligation were subject to a change.
B Cash flows that come earlier will have a lower value. As long as is positive and the amount is the same, the present value will be lower for the $ four years from now compared to five years from now.
C Cash flows that come earlier will have a greater value. As long as is positive and the amount is the same, the present value will be greater for the $ four years from now compared to five years from now.
D Cash flows are the same and this is why the present value does not change.
A
C
B
D
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