The decrease in present value at decreasing rate only, when there is _____________?
Correct answer: D. increase in interest rate
- A. increase in availability
- B. decrease in availability
- C. decrease in interest rate
- D. increase in interest rate
Explanation
Present value falls as the interest rate rises because future cash flows are discounted more heavily. The fall occurs at a decreasing rate because the discounting relationship is nonlinear, so option d is correct.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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