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Suppose the risk-free interest rate is 4 percent A. Having 200 today is the equivalent to having what amount in one year B. Having 200 in one year is equivalent to having what amount today?
Ria2ali
6. Suppose the risk-free interest rate is 4%
A. Having $200 today is the equivalent to having what amount in one year?
Cost= $200 * $1.04
= $208
B. Having $200 in one year is equivalent to having what amount today?
Cost= $200/1+4%
=$192.31
C. Which would you prefer, $200 today or $200 in one year? Does your answer depend on when you need the money? Why or Why not?
If you take the value of $200 today in a year it will be $208. The value of money increases over time. It depends on time value of money. So I would prefer the amount difference of the $200 in a year but you cannot get that without taking the $200 today.
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∙ 13y ago
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