Question

If interest rate is equal to zero, what does it mean about the future value and present value of money?

Answer 1

Solution :-

If interest Rate is equal to Zero , then it means that the Future Value is always equal to the Present Value .

As Future Value = Present Value* ( 1 + r )ⁿ

Now if r = 0 then ( 1 + r )ⁿ always equal to 1

So Future Value is always equal to the Present Value at interest Rate Zero .

Interest Rate is Zero means , Worth of money is same every year , So Future Value is equal to the Present Value

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