Which of the following would you prefer?
A) four hundred dollars to be received in nine years when rates are 8 percent
B) two hundred ten dollars today
C) five hundred dollars to be received in 12 years when rates are 8 percent
D) five hundred dollars to be received in 12 years when rates are 9 percent

Question

Quizplus · Accepted Answer

Option B, receiving $210 today, is preferable because the value of money today is worth more than the same amount in the future due to the potential earning capacity. This concept is known as the time value of money. Without calculating the present value of the other options, it's clear that having money now provides immediate utility and potential for investment, which could yield a higher return than the future values provided, especially when considering the impact of interest rates over time.

Which of the Following Would You Prefer