Answer:
a.True
Explanation:
the increase in interest rate will decrease the future value of the investment.
Answer:
false
Explanation:
Because the investment does not change, a change in interest rate affects the future value of the payment.
The formula for future value, Future Value=(Present Value)×(1+r), implies that when the interest rate r decreases, future value decreases.
For the intuition behind this, consider the following example. If today you deposit $200 into a savings account earning 1% per year, then one year from now you will have $202. However, if the interest rate changes to 2% per year, then one year from now you will have $204. Thus, at higher interest rates, the future value of a present payment is higher.
