Question

In: Finance

Are there any scenarios that you can think of that makes more sense to get the...

Are there any scenarios that you can think of that makes more sense to get the money in the future versus today?

What about lottery winnings? Would you prefer the winnings now or payouts over a period of time?

Solutions

Expert Solution

The above scenario runs on the time value of money. The basic concept is that today's money is more worth than in the future beacuse of the expected inflation. This means that if today's bread is $10 and after one year, the bread price will go up due to inflation. Therefore, today's money is more worth than in the future. Henace, we need to prefer the money today.

The same applies to lottery too. I will prefer taking the money today rather than any payouts over the period of time.


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