When interest rates rise, what needs to happen in order for the present value of an asset to remain the same, using a rate of return approach?

Question

Quizplus · Accepted Answer

When interest rates rise, the present value of an asset decreases if all else remains constant. To keep the present value the same, the asset's income stream must increase, making the asset more valuable, or the cost of capital must decrease, which reduces the discount rate applied to future cash flows, thereby maintaining the asset's present value.

When Interest Rates Rise, What Needs to Happen in Order