« previous next »

Author Question: Interest rates are positive because inflation makes purchases more expensive in the future than ... (Read 67 times)

abc

  • Hero Member
  • *****
  • Posts: 543
on: Jul 1, 2018
Interest rates are positive because inflation makes purchases more expensive in the future than today.
 
  Indicate whether the statement is true or false

Question 2

If the interest rate is positive, the future value of an interest bearing investment is always larger than the present value.
 
  What will be an ideal response?


Anonymous

  • Sr. Member
  • ****
  • Posts: 317
Reply #1 on: Jul 1, 2018
Answer to Question 1

False. Even if inflation were zero, interest rates would be positive since people prefer present consumption to future consumption.

Answer to Question 2

True. FV = PV  (1 + i)t. If the interest rate is positive, the future value will always be greater than the present value.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

The most dangerous mercury compound, dimethyl mercury, is so toxic that even a few microliters spilled on the skin can cause death. Mercury has been shown to accumulate in higher amounts in the following types of fish than other types: swordfish, shark, mackerel, tilefish, crab, and tuna.

Did you know?

The newest statin drug, rosuvastatin, has been called a superstatin because it appears to reduce LDL cholesterol to a greater degree than the other approved statin drugs.

Did you know?

Amphetamine poisoning can cause intravascular coagulation, circulatory collapse, rhabdomyolysis, ischemic colitis, acute psychosis, hyperthermia, respiratory distress syndrome, and pericarditis.

Did you know?

There are more sensory neurons in the tongue than in any other part of the body.

Did you know?

The first war in which wide-scale use of anesthetics occurred was the Civil War, and 80% of all wounds were in the extremities.

Rates of water loss by two turtles and a tortoise indicate an inverse relationship between the dryne Rates of water loss by two turtles and a tortoise indicate an inverse relationship between the dryne
teach their children to care for the earth in hopes of passing on a better world to future generatio teach their children to care for the earth in hopes of passing on a better world to future generatio
Future Nurses Future Nurses
Stay positive Stay positive
How to calculate credit card interest when the interest is compounded How to calculate credit card interest when the interest is compounded
The level of future emissions is closely linked to the rate of population growth The level of future emissions is closely linked to the rate of population growth
Video: How do the different types of chromatography work? (No Audio)

For a complete list of videos, visit our video library