A rational individual would rather receive $1,000 today than receive $1,100 in one year if the applicable nominal interest rate was 12%.

Question

Quizplus · Accepted Answer

A rational individual would prefer to receive the money sooner rather than later when the applicable nominal interest rate is 12%. This is because the individual could invest the $1,000 today and earn interest over the year, which would bring the total value of the investment closer to or potentially even higher than $1,100 in a year's time.

A Rational Individual Would Rather Receive $1,000 Today Than Receive