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

D. The interest rates don’t affect premiums

Answer: Option C

Solution(By Examveda Team)

Higher the interest rate assumed, lower the premium. In other words the higher the rate of interest assumed, the lower the present value.