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25 March, 10:08

With respect to the effect of changes in the stated interest rate and holding periods on future sums, which of the following statements is correct? (Select the best choice below.)

A. An increase in the stated interest rate will decrease the future value of a given sum. Likewise, an increase in the length of the holding period will decrease the future value of a given sum.

B. An increase in the stated interest rate will increase the future value of a given sum. Likewise, an increase in the length of the holding period will increase the future value of a given sum.

C. An increase in the stated interest rate will increase the future value of a given sum. Whereas, an increase in the length of the holding period will decrease the future value of a given sum.

D. An increase in the stated interest rate will decrease the future value of a given sum. Whereas, an increase in the length of the holding period will increase the future value of a given sum.

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  1. 25 March, 13:29
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    B. An increase in the stated interest rate will increase the future value of a given sum. Likewise, an increase in the length of the holding period will increase the future value of a given sum.

    Explanation:

    When the discount rate of a present amount of cash increases it will also result in increase in the future values you would have received. Take for example an investment of $1000 with interest of 25% gives $250 at year end. If Interest is increased to 50% it will give double of the future value (that is $500 at year end).

    When the number of periods or time of an investment increases, the future value also increases. For example a $1,000 investment that is expected to give $200 in 3 years, will give $400 if investment time is increased to 6 years.
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Home » Business » With respect to the effect of changes in the stated interest rate and holding periods on future sums, which of the following statements is correct? (Select the best choice below.) A.
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