In 2 years you are to receive ₹ 20,000. If the interest rate were to suddenly decrease, the present…
The present value would rise. Since \(PV=20{,}000/(1+r)^2\), a decrease in the discount rate reduces the denominator and increases present value.
Choose your answer
In 2 years you are to receive ₹ 20,000. If the interest rate were to suddenly decrease, the present value of that future amount due to you would:
Answer and explanation
Correct answer C
The present value would rise. Since , a decrease in the discount rate reduces the denominator and increases present value.
Practice for these exams
-
West Bengal SET (WB SET)