Question

Using higher interest rates will a. none of the answers is correct. b. decrease the future...

Using higher interest rates will

a. none of the answers is correct.

b. decrease the future value of any investment.

c. increase the future value of any investment.

d. not affect the future value of the investment.

e. make less amount of money to be received for the investments made today

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Answer #1

If interest rate is high,

suppose interest rate is 8% in comparision to 6% and amount of $100 is deposited for 1 year

future value formula = present value *(1+i)^n

then future value of dollar 1 in 1 year =100*(1+8%)^1 = 108

is higher

in comparision to 100*(1+6%)^1 =106

So future value of any investment will increase, if interest rate is high.

correct answer is c, higher interest rate  increase the future value of any investment

All other are wrong, as it is opposite to correct answer

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