i)What effect on the present value of an annuity does increasing the interest rate have? ii)Does a change from 7% to 5% have the same dollar impact as a change from 5% to 3%? Explain with example

A. When the interest rates are increased, the present value of annuity will be DECREASING as this could be attributed to the interest rates being treated as the discounting rate and when the rate of discounting will increase the value of its futuristic cash flows discounted at present will decrease.

B. NO, Decrease from 7 % to 5% does not have same dollar impact as changed from 5 % to 3% because it is leading to to not just equivalent of percentage but it is also reflected to calculation of the overall stream in amounts as it will lead to severe difference.

For example, decrease of 7 % to 5% for one year 100 is +1.7880.

Where add decrease of 5 % to 3% for 1 year 100 is +1.15.