You are the owner of a rare bottle of wine valued at $332. There are no costs associated with storing or selling the wine. Next year you expect the wine to increase in value to $350. If the interest rate is 10 percent:

Question

Quizplus · Accepted Answer

The future value of the wine is $350, but if you sell the wine today for $332 and invest that amount at a 10% interest rate, you would have $332 * 1.10 = $365.20 at the end of the year, which is more than the expected future value of the wine. Therefore, it is financially better to sell the wine today.

You Are the Owner of a Rare Bottle of Wine