As interest rates rise, a firm wouldA) have lower expected costs of investment.B) have increasing present value of expected earning.C) be willing to pay less now to purchase the same number of future dollars.D) be willing to pay more now to purchase the same number of future dollars.

Question

As interest rates rise, a firm wouldA)  have lower expected costs of investment.B)  have increasing present value of expected earning.C)  be willing to pay less now to purchase the same number of future dollars.D)  be willing to pay more now to purchase the same number of future dollars.

Fryda Rodriguez · Accepted Answer

Final Answer : C, Explanation :  As interest rates rise, the cost of borrowing money increases. This means that for a given amount of future dollars, a firm would be willing to pay less now because the cost of financing (or the opportunity cost of using their own funds) is higher. This reflects the concept that the present value of future cash flows decreases as the discount rate (interest rate) increases.

As interest rates rise, a firm would

A) have lower expected costs of investment.
B) have increasing present value of expected earning.
C) be willing to pay less now to purchase the same number of future dollars.
D) be willing to pay more now to purchase the same number of future dollars.

Definitions

Learning Objectives

Learning Objectives

Related questions