As part of a lawsuit settlement, a major corporation offers you $75,000 today or $100,000 next...
As part of a lawsuit settlement, a major corporation offers you $75,000 today or $100,000 next year. Which do you choose if interest rates are 5 percent? If they are 15 percent?
Homework Answers
Present value of both the amounts should be compared to take decision
If the interest rate is 5%,
Present value of amount received today =$75,000
Next year = 100,000/1.05 =$95,238.10
Hence, choose 100,000 next year
If rate =15%
Today =$75,000
Next year = 100,000/1.15 =$86,956.52
Hence, choose 100,000 next year
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As part of a lawsuit settlement, a major corporation offers you
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