Which is more valuable, receiving $775 today or receiving $885 in two and one-half years if interest rates are 7.25%?
A) Receiving $775 today.
B) Receiving $885 in 2.5 years.
C) They are worth the same amount.
D) Need more information to make a determination.

Question

Quizplus · Accepted Answer

The present value of $885 received in 2.5 years at an interest rate of 7.25% is less than $775 today. Calculating the present value: $885 / (1 + 0.0725)^(2.5) ≈ $775. Therefore, $775 today is more valuable.

Which Is More Valuable, Receiving $775 Today or Receiving $885