CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

When, in aggregate, people value having money now substantially more than they value having money in the future, interest rates will become ______.
A. higher
B. lower
C. the same
Explanation: The rates will become higher to move money from the present to the future.

User Contributed Comments 4

User Comment
endurance More money now increases the money supply and (all else equal) induce selling of T-bills to reduce excess money supply
dan1987 Interest Rates can be considered as the compensation for getting your cash in the future
chcarnes There is greater demand to borrow money => interest rates go up
MonuPanda i don't get this. Generally if there is inflation buying power reduces therefore money in hand now is worth more than in future. And in inflationary environment the interest rates are higher.
However the question is just the reverse so i think interest shud be lowe
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