If Interest Rates Increase, the Present Value of a Given

question 82

Multiple Choice

If interest rates increase, the present value of a given payment in the future will

• A) remain the same.
• B) increase.
• C) decrease.
• D) cause an inflation.

---

Definitions:

Unlevered Firms

Companies that operate without the use of borrowed money or debt in their capital structures.

Interest Tax Shield

A reduction in taxable income that results from deducting interest payments, decreasing overall tax liability.

Debt-Equity Ratio

A financial indicator showing the relationship between borrowed funds and equity in a company's asset financing.

Taxable Income

The portion of an individual's or company's income used to determine how much tax will be owed to the government.