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Select the statement that correctly explains the relationship between interest rates and present or future value.

a. Assuming other variables stay the same, if the interest rate increases, the present value of an investment decreases.
b. The interest rate and the present value of an investment are directly related.
c. Assuming other variables stay the same, if the interest rate increases, the future value of an investment decreases.
d. Assuming other variables stay the same, if the interest rate decreases, the present value of an investment decreases.

Respuesta :

Zviko

Answer:

a. Assuming other variables stay the same, if the interest rate increases, the present value of an investment decreases.

Explanation:

As the Interest rate increases, the Future Cash Flows have to be discounted back by large amounts of interest this gives a smaller Present Value.

Therefore,

The correct relationship is a. Assuming other variables stay the same, if the interest rate increases, the present value of an investment decreases.