What would be more valuable, receiving $700 today or receiving $775 in three years if interest...

Question

Question

What would be more valuable, receiving $700 today or receiving $775 in three years if interest rates are 8 percent?

Answer 1

Answer #1

OPTION A : RECEIVING 700 TODAY. THE PRESENT VALUE = 700 ONLY AS IT IS RECEIVED TODAY

OPTION B : RECEIVING 775 IN 3 YEARS. PRESENT VALUE = 775 X PVIF @8%, 3 YEARS = 775 X (1/(1.08)^3) = 615.22

SO OPTION A : RECEIVING 700 TODAY IS MORE VALUABLE.

ANSWER ; RECEIVING 700 TODAY (THUMBS UP PLEASE)

Answer 2

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