Why does a rise in the level of interest rates adversely affect the market value of both assets and liabilities? A rise in the level of interest rates adversely affects the market value of both assets and liabilities because "the fair value of an asset or liability is equal to the present value of current and future cash flows from that asset or liability; rising interest rates increase the discount rate on cash flows and reduces the market value of assets and liabilities" (Saunders & Cornett, p.183). This means falling interest rates increase market values and rising interest rates decrease market values (Saunders & Cornett, 2008). Tim Reference Saunders, A. & Cornett, M. (2008). Financial Institutions Management: A Risk Management Approach. 7th Edition. McGraw-Hill-Irwin