The present value of an expected future payment ________ as the interest rate increases.
A)falls
B)rises
C)is constant
D)is unaffected

Question

Quizplus · Accepted Answer

The present value of an expected future payment is calculated by discounting the future payment by an interest rate. As the interest rate increases, the discount factor also increases, resulting in a lower present value. Therefore, the correct choice is A- "falls".

The Present Value of an Expected Future Payment ________ as the Interest