Question

Would $200, which is to be received in exactly one year, be worth more to you today when the interest rate is 12% or when it is 17%?

Short answer

$200 received in one year would worth less to you today, if interest rate is extended to 17%

Step-by-step solution

Step 1. Introduction

An interest rate indicates how much it costs to borrow money or how much it pays to save money. So, if you're a borrower, the interest rate is the cost of borrowing money expressed as a percentage of the entire loan amount.

Step 2. Explanation

The principle amount is $200 and rate of interest is 12%

$$\begin{gathered} Wheninterestrateis12\% \\ Amount=\frac{200}{1+0.12} \\ =178.5 \\ Wheninterestrateis17\% \\ Amount=\frac{200}{1+0.17} \\ =170.9 \end{gathered}$$