Q: Suppose the interest rate is 3.8%. a. Having $650 today is equivalent to havi
ID: 2827527 • Letter: Q
Question
Q:
Suppose the interest rate is 3.8%.
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 $??. ? (Round to the nearest? cent.)
c. Which would you? prefer, $650today or $650 in one? year? Does your 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 current interest? rate, you will have more than $650 in one? year."Is the above statement true or? false???
Explanation / Answer
a. amount in 1 year = 650 * 1.038 = 674.70
b. amount today = 650/1.038 = 626.20
c. The statement mentioned is true
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