I'm doing a problem where i'm calc'ing how much i should be willing to pay now (present value) for an annuity that has an interest payment (discount) of varying amounts. The high the i goes, calcs telll me the less I should give in money right now.
If its got a higher interest rate wouldn't it be worth more in the future, so why would I pay less?
2007-02-01 01:57:06 · 3 answers · asked by Anonymous in Business & Finance ➔ Investing
check the very fine print. Some of that "interest" is really return of principle.
2007-02-01 02:29:26 · answer #1 · answered by gosh137 6 · 0⤊ 0⤋
Good question. As your interest goes up, you accept more risk so you gain a higher reward. Your principal shrinks because you put the money in up front so your reward is gained immediately by smaller capital requirements.
2007-02-01 05:34:57 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Get free rates
2015-02-04 21:17:46 · answer #3 · answered by ? 1 · 0⤊ 0⤋