Question

You are given the choice between receiving $100,000 today or $100,000 in one year. Which of the following statements is accurate? Group of answer choices You would prefer to receive $100,000 today, as you could invest the money and in one year have much more than the original $100,000. You would prefer to receive $100,000 today, as the present value of receiving $100,000 in one year is much less than $100,000. You would prefer to receive $100,000 today due to the time value of money. All of the above statements are accurate. None of the above statements are accurate.

Answer 1

Answer

Get $ 100,000 today

All the above statements are correct

reason -

-> Investment

Example: If you invest at a minimum rate of 1%

After 1 year you will have = 100,000 (1.01) ^ 1

= 101,000 dollars

-> Discounting factor (present amount of future amount will be less)

Examples ; If you receive $ 100,000 after 1 year and the discount rate is a minimum of 1%

Then = 100,000 (1.01) ^ - 1

= $ 99,009.9

-> Time value of money (The amount you currently have is more than that amount in the future.)