What can be said about interest rates in this problem

Assignment Help Financial Management

Reference no: EM131309633

Suppose you received $1,000 and you wish to find its value in 10 years. Calculate the value of this gift if the interest rate was 8% per year, 10% per year, and 12% per year. What can be said about interest rates in this problem?

A - As rates increase, present value decreases at a decreasing rate.

B - As rates increase, present value decreases at an increasing rate.

C - As rates increase, future value increases at a decreasing rate.

D - As rates increase, future value increases at an increasing rate.

Reference no: EM131309633

Questions Cloud

Ebit indifference level associated with two financing plans : EBIT-EPS Analysis) Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full ..

Projected sales for the first six months : CraftCo, Inc.' projected sales for the first six months of 2012 are given below: Jan. $500,000 April $490,000 Feb. $740,000 May $740,000 Mar. $380,000 June $610,000 40% of sales are collected in cash at time of sale, 50% are collected in the month fo..

Modified internal rate of return when evaluating projects : Marathon Technologies, Inc. is using the modified internal rate of return (MIRR) when evaluating projects. The company Is able to reinvest cash flows received from the project at an annual rate of 13.10 percent. Find the MIRR for the companys project..

What is annual ordering cost of the post card inventory : Post Card Depot, an large retailer of post cards, orders 7,952,250 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 15 times over the next year. Post Card Depot receives the same number of post cards each time it..

What can be said about interest rates in this problem : Suppose you received $1,000 and you wish to find its value in 10 years. Calculate the value of this gift if the interest rate was 8% per year, 10% per year, and 12% per year. What can be said about interest rates in this problem?

The present value of future cash flows increases : Holding all other variables constant, payment per period for an annuity due will be higher than an ordinary annuity. As the discount rate increases, the present value of future cash flows increases.

Compound annual risk premium on the real estate investment : Given a real-estate property is expected to yield 2% per quarter (nominal) with a standard deviation of the (effective) quarterly rate of 10%. How do you compute the continous compound annual risk premium on the real estate investment? Spefically, ho..

What is annual carrying costs of post card inventory : Post Card Depot, an large retailer of post cards, orders 4,357,410 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 11 times over the next year. Post Card Depot receives the same number of post cards each time it..

Using the net present value when evaluating projects : Tall Trees, Inc is using the net present value (NPV) when evaluating projects. You have to find the NPV for the company's project, assuming the company's cost of capital is 11.87 percent. The initial outlay for the project is $464.600. The project wi..

User Account

All Pages