Lower interest rates increase the present value of all projected cash flows from a loan-backed security resulting in a rise in its market value.

Name: Lower interest rates increase the present value of all projected cash flows from a loan-backed security resulting in a rise in its market value.
Brand: Quizplus
Rating: 4.7 (41 reviews)

Question

Quizplus · Accepted Answer

Lower interest rates decrease the discount factor used to calculate the present value of future cash flows, leading to a higher present value and therefore, a higher market value of loan-backed securities.

Lower Interest Rates Increase the Present Value of All Projected