Question

g Evaluate the following three statements about impact of interest rates. I. As interest rates increase, the present value of a single payment increases. II. As interest rates increase, the present values of annuities decrease. II. As interest rates increase, the future values of annuities increase, Which statement/s is/are correct

Answer 1

The true statements about the impact of interest rates are:

• II. As interest rates increase, the present values of annuities decrease.
• II. As interest rates increase, the future values of annuities increase.

What happens when interest rates increase?

The present value of annuities and single payments will decrease because they will be discounted by a higher rate.

The future value of an annuity will increase however because the rate used to compound the annuity would have increased.

Find out more on the future value of an annuity at https://brainly.com/question/14702616.

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