question 5 which of the following statements is most correct? a if the discount (or interest) rate is…

question 5 which of the following statements is most correct? a if the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series. b to increase present consumption beyond present income normally requires either the payment of interest or else an opportunity cost of interest forgone. c disregarding risk, if money has time value, it is impossible for the present value of a given sum to be greater than its future value. d disregarding risk, if the present value of a sum is equal to its future value, then the interest rate must be zero. e all of the statements are correct. 1.5 points

question 5 which of the following statements is most correct? a if the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the present value of the same series. b to increase present consumption beyond present income normally requires either the payment of interest or else an opportunity cost of interest forgone. c disregarding risk, if money has time value, it is impossible for the present value of a given sum to be greater than its future value. d disregarding risk, if the present value of a sum is equal to its future value, then the interest rate must be zero. e all of the statements are correct. 1.5 points

Answer

Brief Explanations:

  • Option A: The future value of an expected series of payments will exceed the present value when the discount rate is positive due to the time - value of money concept where money today is worth more than the same amount in the future.
  • Option B: To increase present consumption beyond present income, one must either pay interest (borrowing) or forgo interest (saving less), which is the opportunity cost of interest forgone.
  • Option C: Money has time - value, so the present value of a sum is generally less than its future value when there is a positive interest rate. If the present value is greater than the future value, it defies the time - value of money principle.
  • Option D: If the present value of a sum equals its future value, the interest rate must be zero as there is no growth or discounting of the money over time.

Answer:

E. All of the statements are correct.