Question
Suppose the interest rate is 3.6%. a. Having $500 today is equivalent to having what amount in one year? b. Having $500 in one year
Suppose the interest rate is
3.6%.
a. Having
$500
today is equivalent to having what amount in one year?
b. Having
$500
in one year is equivalent to having what amount today?
c. Which would you prefer,
$500
today or
$500
in one year? Does your answer depend on when you need the money? Why or why not?
Question content area bottom
Part 1
a. Having
$500
today is equivalent to having what amount in one year?
It is equivalent to
$enter your response here.
(Round to the nearest cent.)
Part 2
b. Having
$500
in one year is equivalent to having what amount today?
It is equivalent to
$enter your response here.
(Round to the nearest cent.)
Part 3
c. Which would you prefer,
$500
today or
$500
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,
$500
today is preferred to
$500
in one year. This answer is correct even if you don't need the money today, because by investing the
$500
you receive today at the current interest rate, you will have more than
$500
in one year."
Is the above statement true or false?
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