A yen today is worth more than a yen a year from now as long as:
A)the interest rate is negative.
B)the interest rate is positive.
C)the depreciation rate is negative.
D)the depreciation rate is positive.

Question

Quizplus · Accepted Answer

A positive interest rate means that the yen can earn interest if it is invested, making it worth more in the future. Therefore, a yen today is worth more than a yen a year from now if the interest rate is positive. A and D are incorrect because negative interest or depreciation rates decrease the value of the yen over time. C is incorrect because a negative depreciation rate would mean that the yen is appreciating, which would increase its value over time.

A Yen Today Is Worth More Than a Yen a Year