Which of the following is NOT a reason why an increase in the interest rate usually makes investment projects less attractive?
A) At a higher rate, future dollars are worth less compared to current dollars.
B) A typical investment project incurs the majority of its costs early in its life.
C) A typical investment project receives a disproportionate fraction of its revenue early in its life.
D) At a higher rate, putting money into the bank is more attractive.

Question

Quizplus · Accepted Answer

An increase in the interest rate makes future dollars worth less in present value terms, which affects the attractiveness of investment projects that typically incur most of their costs early but receive revenues later. Therefore, a statement suggesting that projects receive a disproportionate fraction of their revenue early contradicts the general pattern of investment cash flows, making it the incorrect reason.

Which of the Following Is NOT a Reason Why an Increase