Read Small Article: GE's Pension Deficit Is Set to Soar

Question : 1 If we keep the stream of payments the firm will need to make to retirees (note: these are future cash outflows) constant,will a firm's pension obligation be higher or lower with lower interest rate (note: a firm's pension obligation is estimated as the present value of the future payment streams)?Explain briefly.

Questions 2. Based on your answer to 1, fill in the blanks in the following statement regarding the relation between Present Value and interest rate in general. Other things being equal, thelower the discount rate, the ________ the present value.

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