Assume that you are willing to postpone consumption of $1,000 today and buy a certificate of deposit (CD)at your local bank with the $1,000.Holding the CD for one year provides you with an 8% reward for saving or postponing consumption.This reward for postponing consumption implies that at the end of the year you will have how much more money for spending?
A)$79.50
B)$79.75
C)$79.90
D)$80.00

Question

Quizplus · Accepted Answer

The reward for postponing consumption is calculated as the interest earned on the initial amount. With an 8% interest rate on $1,000, the interest earned in one year would be $1,000 * 0.08 = $80. Therefore, at the end of the year, you will have $80 more for spending.

Assume That You Are Willing to Postpone Consumption of $1,000