For a given investment amount, more proceeds require a lower interest rate. is this true or false?

Solutions

Expert Solution

FALSE

For a given investment amount, more proceeds require a higher interest rate.

Example: Let's say our investment is $100,000 and the interest rate is 5%

Then, the proceeds after 10 years is:

FV10 = PV * (1 + r)^n

FV10 = 100,000 * (1 + 0.05)^10

FV10 = $162,889.4626777441

If the interest rate is less than 5%, say 3%, then the proceeds will be lower than $162,889.4626777441

FV10 = 100,000 * (1 + 0.03)^10

FV10 = $134,391.6379344122

If we want more proceeds, then a higher interest rate is required.

So, the statement is FALSE

jeff jeffy answered 2 years ago

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