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The present value of cash flows will decline if:

1. The discount rate rises
2. The cash flows occur closer in time
3. The compounding frequency rises
4. The level of risk rises

a. 1 and 2
b. 1 and 3
c. 2 and 3
d. 3 and 4
e. 1,3, and 4

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Solution Summary

The cash flows are studied. The level of risk rises for compounding frequency rises are determined.

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The answer is e -
1. The discount rate rises
3. The compounding frequency ...

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