easy · Principles of Finance time-value-of-money
What is the relationship between the discount rate (r) and the present value (PV) of a perpetuity?
- An inverse relationship; as the rate increases, the value decreases.
- A constant relationship; changes in the rate do not affect the value.
- A linear relationship; if the rate doubles, the value doubles.
- A direct relationship; as the rate increases, the value increases.
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