Question

In: Finance

Suppose the​ risk-free interest rate is4.5% . a. Having $300 today is equivalent to having what amount in one​ year? b. Having $300 in one year is equivalent to having what amount​ today? c. Which would you​ prefer, $300 today or $300 in one​ year? Does

Suppose the risk-free interest rate is 4.5% . 

a. Having $300 today is equivalent to having what amount in one year?

 b. Having $300 in one year is equivalent to having what amount today?

 c. Which would you prefer,  $300 today or $300  in one year? Does your answer depend on when you need the money?  Why or why not?

Solutions

Expert Solution

4.5%= 0.045

A) 300* (1+0.045)= 313.5 answer


B) 300/ (1+ 0.045)= 287.0813397129 or answer: 287.08


C) 300 today, No the answer does not depend on when you need the money, because if you didn't need it then the can be invested and you could have more than in one year


jeff jeffy answered 2 years ago
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