Bobby faces two choices.The first is to receive $600 on the spot.The other choice is to receive $800 a year from now.The interest rate is 5% per year.What could a possible explanation for Bobby choosing to receive $600 on the spot?
A) Bobby finds that the present value of the $800 a year from now is less than $600.
B) Bobby may have time-inconsistent preferences.
C) Although Bobby chooses $600 on the spot, he is actually indifferent between the two options.
D) None of the above is correct.
Correct Answer:
Verified
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