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The present value decreases at a decreasing rate when there is ____________?

Present value is inversely related to the interest rate. When the interest rate increases, the present value of future cash flows decreases because the discounting effect becomes stronger.... Read More

1 FINANCE MCQS

The present value decreases at a decreasing rate when there is ____________?

  • Increase in availability
  • Decrease in availability
  • Decrease in interest rate
  • Increase in interest rate
Correct Answer: D. Increase in interest rate

Detailed Explanation

Present value is inversely related to the interest rate. When the interest rate increases, the present value of future cash flows decreases because the discounting effect becomes stronger.

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