Final answer:
The present value of an annuity decreases with an increase in the discount rate. A rise in the money supply can lead to a decline in interest rates, while a rise in demand for loans increases the quantity of loans made and received. The correct option is A.
Step-by-step explanation:
The answer to which one of the following will decrease the present value of an annuity is a. Increase in the discount rate. When the interest rate (also known as the discount rate) applied to the cash flow from an annuity is increased, the present value of the annuity decreases.
This is due to the fact that the future payments are discounted more heavily as the discount rate increases, which makes them worth less in today's terms.
Regarding the changes in the financial market, a rise in supply of money typically leads to a decline in interest rates because more funds are available for borrowing, which usually results in lower costs of borrowing, or lower interest rates.
Conversely, a rise in demand for funds will typically lead to an increase in the quantity of loans made and received, as people are willing to take out more loans to capitalize on potential investments or expenses.