Suppose the interest rate is 3.9%. a. Having $650 today is equivalent to having

Question

Suppose the interest rate is 3.9%. a. Having $650 today is equivalent to having what amount in one year? b. Having $650 in one year is equivalent to having what amount today? c. Which would you prefer, $650 today or $650 in one year? Does yow answer depend on when you need the money? Why or why not? a. Having $650 today is equivalent to having what amount in one year? It is equivalent to $ (Round to the nearest cent) b. Having $650 in one year is equivalent to having what amount today? It is equivalent to $ I(Round to the nearest cent) . Which would you prefer, $650 today or $650 in one year? Does yow answer depend on when you need the money? Why or why not? Because money today is worth more than money in the future, $650 today is preferred to $650 in one year. This answer is correct even if you don?t need the money today, because by investing the $650 you receive today at the correct interest rate, you will have more than $650 in one year. Is the above statement true or false?

Explanation / Answer

1) FV = 650(1.039)^1 =675.35

2) PV = 650 / (1.039)^1 = 625.602

3) True

650 today is better than 650 in one year .(PV of 625).

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.