Reference no: EM132492623
Question 1: The present value of a stream of cash flows you expect to received will always increase when:
Option a. the interest rate is greater than zero and the number of compounding periods increase.
Option b. the interest rate is greater than zero and the number of compounding periods decrease.
Option c. the interest rate is zero and the number of compounding periods increase.
Option d. the interest rate is zero and the number of compounding periods decrease.
Question 2: If we hold all other factors the same, an increase in interest rates will:
Option a. Decrease the present value of a stream of constant payments we expect to receive.
Option b. Increase the present value of a stream of constant payments we expect to receive.
Option c. Decrease the interest revenue that a company will earn on its funds that it holds in its interest-bearing checking account.
Option d. No impact on how much a company should be willing to pay for factory equipment that is expected to significantly reduce the factory electricity costs.