As the Interest Rate Increases, the Present Value of an Amount

question 50

Multiple Choice

As the interest rate increases, the present value of an amount to be received at the end of a fixed period

• A)increases.
• B)decreases.
• C)remains the same.
• D)Not enough information is given to tell.

---

Definitions:

Collection Float

The time period between when a payment is initiated by a payer and when the funds are available in the payee’s account.

Opportunity Costs

The benefit that is missed or foregone when choosing one alternative over another.

Trading Costs

Expenses associated with buying and selling securities, including broker commissions and spreads.

Speculative Motive

This motive describes the intention to hold cash for the purpose of taking advantage of opportunities that may arise, such as purchasing assets expected to increase in value.