A higher interest rate:
A)reduces the present value of future money.
B)increases the present value of future money.
C)maintains the same present value of future money.
D)reduces the future value of present money.

Question

Quizplus · Accepted Answer

A higher interest rate means that money in the future is worth less in today's dollars. This is because the higher interest rate represents a higher opportunity cost of holding money today instead of investing it for a higher return in the future. Therefore, a higher interest rate reduces the present value of future money.

A Higher Interest Rate