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An Increase in the Risk Associated with a Future Stream

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True/False

An increase in the risk associated with a future stream of cash should result in an increase in the discount rate used in the present value calculation.


Definitions:

Unamortized Premium

An unamortized premium refers to the remaining amount of a premium above the face value of a bond that has not yet been expensed over the bond's life.

Market Rate

The prevailing interest rate available in the marketplace for securities or loans at any given time.

Six-Month

A period or duration of six calendar months.

Interest Payment

The cash paid by a borrower to a lender for the privilege of borrowing money, typically based on the interest rate of the loan or debt.

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