Which of the following would you prefer?
A)$400 to be received in nine years when rates are 8 percent
B)$210 today
C)$500 to be received in 12 years when rates are 8 percent
D)$500 to be received in 12 years when rates are 9 percent

Question

Quizplus · Accepted Answer

Option A offers $400 after 9 years at a rate of 8%, which is a future value. To determine the present value, we need to discount the future value using the present value formula, which takes into account the interest rate and time. Using the formula, the present value of $400 received after 9 years at 8% rate is $210. Option B offers the same amount immediately. Option C offers $500 after 12 years at an 8% rate, which has a present value of $198 today. Option D offers $500 after 12 years at a 9% rate, which has a present value of $164. Therefore, option B is the best choice as it offers the highest immediate amount.

Which of the Following Would You Prefer