17. When the interest rate in an economy rises, the stock market typically reacts negatively. This is because (a) the future dividends companies provide to their investors are discounted more heav- ily. (b) the present values of the future dividends companies provide to their investors decrease. (c) investors sell their investments in the stock market and deposit the money into banks. (d) All of the above are correct. 18. Suppose that the interest rate is 8%. The sum of the present values of three payments of $500 to be received in 3 consecutive years is calculated as (a) $500 x 1.08 x 3 (b) $500 $500 $500 1.08 + (1.08)2 7 71.08)3 (c) $500 x 1.08 + $500 x (1.08)2 + $500 x (1.08)3 (d) $500 x 3 19. When a person buys insurance, which of the following best describes the economic transaction? (a) The person donates money to the insurance company. (b) The insurance company pays the person to buy the risk, a desirable commodity, from him/her. (c) The person pays to sell the risk, an undesirable commodity, to the insurance com- pany. (d) The person is more efficient than the insurance company in diversifying risk