Lower the interest rate assumed, lower the premium
Higher the interest rate assumed, higher the premium
Higher the interest rate assumed, lower the premium
The interest rates don’t affect premiums
✅ The correct answer is C.
Higher the interest rate assumed, lower the premium. In other words the higher the rate of interest assumed, the lower the present value.
Higher the interest rate assumed, lower the premium. In other words the higher the rate of interest assumed, the lower the present value.