If an increase in the safe interest rate is completely offset by a fall in the risk premium, the present value of a risky asset:
A)stays the same.
B)rises.
C)falls.
D)There is not enough information provided to Answer the question.

Question

Quizplus · Accepted Answer

An increase in the safe interest rate would cause the present value of a risky asset to fall, but if it is completely offset by a decrease in the risk premium, the net effect would be zero and the present value of the asset would stay the same.

If an Increase in the Safe Interest Rate Is Completely