Q445
Interest rates are one of the important components used while determining the premium. Which of the below statement is correct with regards to interest rates?
A.
Lower the interest rate assumed, lower the premium
B.
Higher the interest rate assumed, higher the premium
C.
Higher the interest rate assumed, lower the premium
AnswerD.
The interest rates don’t affect premiums
Answer: Option C
Solution
Answer: Option C
Solution:
Higher the interest rate assumed, lower the premium. In other words the higher the rate of interest assumed, the lower the present value.