As interest rates fall, present values
A)increase.
B)decrease.
C)stay the same.
D)cannot be determined; need compounding frequency.

Question

Quizplus · Accepted Answer

When interest rates fall, the discount rate used to calculate present value decreases. This means that future cash flows are being discounted at a lower rate, resulting in a higher present value. Therefore, as interest rates fall, present values increase.

As Interest Rates Fall, Present Values