a. increases the present value of future returns from investment and increases investment.
b. increases the present value of future returns from investment and decreases investment.
c. decreases the present value of future returns from investment and increases investment.
d. decreases the present value of future returns from investment and decreases investment.
1 answer
The correct answer is:
d. decreases the present value of future returns from investment and decreases investment.
When the prevailing interest rate increases, the present value of future cash flows from investments decreases, making investments less attractive. Consequently, this leads to a decrease in investment activity.
