PRC-2 · Chapter 2 · Question 37 of 45
What happens to the Present Value of a future payment as the discount rate (interest rate) increases?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It decreases.
Explanation
Because money can earn more elsewhere if rates are high, a future payment is worth significantly less in today's terms when the discount rate rises.
More Coordinate System and Its Application MCQs
- Q39The process of systematically paying off a debt (like a mortgage) with regular payments over time is called:
- Q40If you invest Rs. 1,000 at 5% interest compounded annually for 2 years, what is the Future Value (FV)?
- Q41What is 'Depreciation' in a financial context?
- Q42An investment produces Rs. 5,000 every year forever. This type of cash flow is called a/an:
- Q43In the 'Reducing Balance' method of depreciation, more depreciation is charged in: