Homework Answers
In order to find the correct answer, it is essential to find the present value of both Ian and Sunny's money that they will going to receive in future.
PV of Ian's money to be received after six years
PV = Amount * PV factor (Value of $1 to be received after 6 years discounted at 7%)
= $20,000 * 0.66634
= $13,326.84
PV of Sunny's money to be received after 9 years
PV = Amount * PV factor (Value of $1 to be received after 9 years discounted at 7%)
= $20,000 * 0.543933
= $10,878.67
Therefore, the correct option is 'In today's dollars, Ian's money is worth more than Sunny's money'. This is because Ian will have $13,326 while Sunny will have $10,878 after six and nine years respectively.
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