When the Costs of an Investment Come Before That Investment's

question 102

Multiple Choice

When the costs of an investment come before that investment's benefits, what will be the effect of a rise in interest rates on the attractiveness of that investment to potential investors?

• A) It will make it more attractive, since it will increase the investment's net present value (NPV).
• B) It will make it more attractive, since it will decrease the investment's net present value (NPV).
• C) It will make it less attractive, since it will increase the investment's net present value (NPV).
• D) It will make it less attractive, since it will decrease the investment's net present value (NPV).

---

Definitions:

Total Fertility Rate

The total number of offspring a woman is predicted to give birth to during her lifetime, based on existing age-related fertility trends.

Replacement Rate

The percentage of a worker's pre-retirement income that is paid out by a pension program upon retirement.

Market Price

The market rate at which an asset or service is currently available for buying or selling.