If the Interest Rate on Bank CDs Increases, the Opportunity

question 169

True/False

If the interest rate on bank CDs increases, the opportunity cost of holding money increases.

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Definitions:

Distributive Property

A property indicating that multiplying a sum by a number gives the same result as multiplying each addend by the number and then adding the products.

Principal Investment

The initial amount of money invested, before any earnings or interest.

Simple Interest

A method of calculating the interest charge on a loan or financial investment based on the initial principal and a fixed interest rate over time.

Interest Rate

The proportion, typically expressed as a percentage, at which interest is charged on a loan or paid on savings.