Why would you prefer to receive $100 today rather than wait and receive $100 one year...

Why would you prefer to receive $100 today rather than wait and receive $100 one year from now?

Prompts:

For the first part of the discussion post, list all the potential explanations you can think of for the time value of money. For each cause, write a sentence or two about how it explains your preference for money today rather than money at some future date. Let’s see how many different explanations we can uncover.

For the second part of the discussion post, imagine that I promise to pay you either $100 today or some different amount of money one year from now. How much would I have to promise to pay you in one year for you to choose to forego the $100 today and wait one year for the cash? Explain how you came up with the value you would need to receive in order to choose to wait.

Expert Solution

I will be receiving with $100 today rather than I will be receiving $100 later because of the concept of the time value of money.

time value of money will be advocating that a similar amount of money which is available today will be having a higher value than the similar amount of money available at a later date because of the effect of the reflection and the effect of the systematic risk value of the money will be falling.

it will also mean that the disposable value of the money at the Future dates would be lower so we would want to have the disposable value of money at present as it can buy more.

the rate of inflation when applied with the present value of the money and if I am adjusting the future value of the money after the rate of the inflation associated with the present value of money then I can accept the similar value of money after compounding with the inflation in next years.

I will be trying to find the rate after looking at the inflation in the economy.

jeff jeffy answered 1 year ago

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