Finance

If the discount rate is 5 percent, Investment X has a present value of $50,651 and Investment Y has a present value of $49,770. If the discount rate is 15 percent, Investment X has a present value of $41,704 and Investment Y has a present value of $50,314. This is because the present value of an investment is equal to the total amount of the future payments divided by (1 + r)^n, where r is the discount rate expressed as a decimal and n is the number of periods. Therefore, the higher the discount rate, the lower the present value of the investment. Hence, Investment X's present value is higher when the discount rate is 5 percent than when the discount rate is 15 percent, whereas Investment Y's present value is higher when the discount rate is 15 percent than when the discount rate is 5 percent.