A dollar today is worth more than a dollar to be received in the future because
A) a stated rate of return is guaranteed on all investment opportunities.
B) the dollar can be invested today and earn interest.
C) inflation will increase the purchasing power of a future dollar.
D) None of these options are true.

Question

Quizplus · Accepted Answer

The time value of money concept suggests that a dollar received today is worth more than the same amount of money received in the future. This is because the dollar received today can be invested, and earn interest, which will increase its value over time. Therefore, option (B) is correct. Option (A) is not true because not all investment opportunities guarantee a stated rate of return. Option (C) is also incorrect because inflation will decrease the purchasing power of a future dollar, not increase it. Option (D) is incorrect because option (B) is true.

A Dollar Today Is Worth More Than a Dollar to Be