Given the future value, which of the following will contribute to a lower present value? a. higher discount rate b. fewer time periods c. less frequent discounting d. lower discount factor

What would contribute to a lower present value is a higher discount rate.

Present value is the sum of discounted cash flows. In order to determine the correct options, examples would be used.

Example 1: less frequent discounting

The future value of an amount is $1000 in 3 years. The discount rate is 10%. The present value is:

$1000 / (1.1)^3 = $751.31

Example 2: Higher discount rate

The future value of an amount is $1000 in 3 years. The discount rate is 15%. The present value is:

$1000 / (1.15)^3 = $657.52

Example 3: fewer time periods

The future value of an amount is $1000 in 1 year. The discount rate is 10%. The present value is:

$1000 / (1.1) = $909.09

Example 4: lower discount factors

The future value of an amount is $1000 in 3 years. The discount rate is 5%. The present value is:

$1000 / (1.05)^3 = $863.83

Example 5: more discounting

The future value of an amount with quarterly compounding is $1000 in 3 years. The discount rate is 10%. The present value is:

$1000 / (1.025)^12 = 743.56

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