Asset A provides a cash flow of $100 in six years' time.Asset B provides a cash flow of $100 in four years' time.Which asset would a rational investor rather own?
A)Asset A
B)Asset B
C)Either asset A or asset B
D)Can't tell from the information provided

Question

Quizplus · Accepted Answer

A rational investor would prefer Asset B because it provides the same cash flow as Asset A but in a shorter time frame. This means that the investor would have access to their return faster, and potentially have the opportunity to invest the proceeds in another opportunity. Additionally, there is less uncertainty around the longer-term cash flow of Asset A, which may impact the present value of that cash flow. Therefore, Asset B is the better choice.

Asset a Provides a Cash Flow of $100 in Six