You are scheduled to receive $10,000 in one year.An increase in the interest rate will have what effect on the future value of this cash flow?
A)It will cause the future value to fall.
B)It will cause the future value to rise.
C)It will have no effect on the future value.
D)The effect cannot be determined with the information provided.
E)It will cause the future value to fall significantly.

Question

Quizplus · Accepted Answer

The future value of a cash flow that is already set to be received in the future does not change with interest rate fluctuations. The interest rate affects the present value or the cost of obtaining that future cash flow today, not the amount of the cash flow itself when it is already determined for a future date.

You Are Scheduled to Receive $10,000 in One Year