If the prevailing interest rate is 10 per cent, a rational person should be indifferent between receiving R1 000 today and R1 000 one year from today.

Question

Quizplus · Accepted Answer

A rational person would prefer to receive R1 000 today rather than waiting one year to receive it, as they could invest the money now and earn interest on it rather than waiting. At a 10% interest rate, receiving R1 000 today would allow the person to earn R100 in interest over the course of the year. Therefore, they would value receiving R1 000 today more than receiving R1 000 one year from today.

If the Prevailing Interest Rate Is 10 Per Cent, a Rational