Discussion
The price of money next year in terms of money, this year is expressed as .................. .
Answer: D
The price of next year's money in terms of this year's money is 1 / (1 + nominal interest rate).
One rupee invested today at nominal rate i grows to (1 + i) rupees next year. So one rupee next year is worth 1/(1 + i) rupees today: this discount factor is the price, in today's money, of a rupee delivered next year.
1 + i (B) is the reverse, the price of this year's money in terms of next year's. The real interest rate (A, C) converts goods across time, not money, so it is not the right rate here.
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