If the interest rate is zero, a promise to receive a $100 payment one year from now is:
A)More valuable than receiving $100 today
B)Less valuable than receiving $100 today
C)Equal in value to receiving $100 today
D)Equal in value to receiving $101 today

Question

Quizplus · Accepted Answer

If the interest rate is zero, the time value of money is not taken into account. Therefore, the value of the $100 payment one year from now is exactly the same as receiving $100 today. Thus, the answer is "Equal in value to receiving $100 today".

If the Interest Rate Is Zero, a Promise to Receive