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Q: If the interest rate is zero the future value interest factor equals?

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it increases

Because the interest rate affects opportunity cost of holding money/spending it. Higher interest increases the future value of current money, and this change the optimal allocation decision of it in the present. For example, the less valuable money is in the future, the more of it you would expect people to spend now.

The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well. The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well.

Internal rate of return is the rate at which your future cash flow when discounted equals to the present value of your investment or proposed investment.

When interest rates rise, bonds lose value; when interest rates fall, bonds become more attractive.

Related questions

Future value interest factor annuity

The Present Value Interest Factor PVIF is used to find the present value of future payments, by discounting them at some specific rate. It decreases the amount. It is always less than oneBut, the Future Value Interest Factor FVIF is used to find the future value of present amounts. It increases the present amount. It is always greater than one.

The present value factor is the exponent of the future value factor. this is the relationship between Present Value and Future Value.

PVIF (Present Value Interest Factor) is a table which shows the present value of sum which will be realiseed in the future. PVIFA (Present Value Interest Factor of Annuity) is similar to a PVIF but tailored to one or a group of Annuities.

No. Future Value Calculators use a set amount, payment and interest fee to calculate. If you need to apply the inflation factor, you will need to use an Inflation Calculator.

The present value of future cash flows is inversely related to the interest rate.

What effect do interest rates have on the calculation of future and present value, how does the length of time affect future and present value, how do these two factors correlate.

direct

Future value= 25000*(1.08)10 =53973.12

Increases

What is the future value of $1,200 a year for 40 years at 8 percent interest? Assume annual compounding.

Present value annuity factor calculates the current value of future cash flows. The present value factor is used to describe only the current cash flows.

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