# If the interest rate is zero, then $100 to be paid in 10 years has a present value that is a. less than$100. b. exactly $100. c. more than$100. d. indeterminate.

### Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091985

### Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091985

#### Solutions

Chapter
Section
Chapter 9, Problem 1CQQ
Textbook Problem

## If the interest rate is zero, then $100 to be paid in 10 years has a present value that isa. less than$100.b. exactly $100.c. more than$100.d. indeterminate.

Expert Solution
To determine

Calculation of present value of money.

Option “b” is correct.

### Explanation of Solution

Option (b):

Present value of money can be calculated as follows.

Present value=Future value(1+Interest)Time period100=100(1+0)10100=1001100=100

Thus, the option “b” is correct.

Option (a):

The present value would be less than $100 if the interest rate is positive. Thus, the option ‘a’ is incorrect. Option (c): The present value is greater than$100, if the interest rate is negative. Thus, the option “c” is incorrect.

Option (d):

The present value can be determined by using future value, interest rate, and the time period. Thus, the option “d” is incorrect.

Economics Concept Introduction

Concept introduction:

Present value: Thepresent value refers to the today’s value of the future amount that adjusted with the existing interest rate.

### Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Get Solutions

### Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Get Solutions

Find more solutions based on key concepts
Show solutions
In what ways is economics a science?

Principles of Economics (MindTap Course List)

Why is the journal called a book of original entry?

College Accounting (Book Only): A Career Approach

This chapter discusses the discounted dividend and corporate valuation models for valuing common stocks. Two al...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What is an overhead consumption ratio?

Cornerstones of Cost Management (Cornerstones Series)