An SI's cash flows are ____ related to interest rate movements.
A)positively related to
B)negatively related to
C)unrelated to
D)none of the above

Question

Quizplus · Accepted Answer

An SI's cash flows are negatively related to interest rate movements. When interest rates increase, the cash flow from the SI decreases, and vice versa. This is because the value of the future cash flows decreases as the discount rate (i.e., interest rate) increases.

An SI's Cash Flows Are ____ Related to Interest Rate