You are to choose between receiving $909.00 today or $1,000.00 in 12 months time. Assuming an interest
Question:
You are to choose between receiving $909.00 today or $1,000.00 in 12 months’ time. Assuming an interest rate of 10% and rounding off to a whole dollar, should you be indifferent between the two options? Why or why not? What does this exercise tell you about the relationship between $1 today and $1 tomorrow?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 35% (14 reviews)
Option 1 PV 90900 Option 2 PV of 1000 1000110 90909 Yes we should be indifferent b...View the full answer
Answered By
Branice Buyengo Ajevi
I have been teaching for the last 5 years which has strengthened my interaction with students of different level.
4.30+
1+ Reviews
10+ Question Solved
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Question Posted:
Students also viewed these Corporate Finance questions
-
What is the effective interest rate of 10 percent compounded quarterly, versus 10 percent compounded monthly?
-
Assuming an interest rate of 8.4 percent compounded semiannually, the future value of $2,100 in 17 years is $______. (Do not include the dollar sign ($). Round your answer to 2 decimal places.
-
You are considering investing $3,000 at an interest rate of 8% compounded annually for five years or investing the $3,000 at 9% per year simple interest for five years. Which option is better?
-
Since graduation from college, your friend William has become a highly paid and successful financial advisor. His list of clients is long, and his advice is sought by many. Discuss the merits of the...
-
Consider a memory system that uses a 32-bit address to address at the byte level, plus a cache that uses a 64-byte line size. a. Assume a direct mapped cache with a tag field in the address of 20...
-
The three partners of Summer Springs Medical Clinic agree to liquidate their partnership on September 15, 2017. At that point, the accounting records show the following balances: The three partners...
-
You are given the following information concerning three stocks. Stock Price Shares Outstanding A $30 1,000,000 B $25 8,000,000 C $20 5,000,000 a) Construct a value-weighted average and a geometric...
-
In what ways might a rms suppliers improve or undermine the rms Lean efforts? Can you think of any examples from the chapter that illustrate this idea?
-
QUESTION 1 The significant problems we face cannot be solved at the same level of thinking we were at when we created them. Albert Einstein, 1879-1955. Against the pretext: 1. Interpret rethinking in...
-
Lawnox, a manufacturer of lawn mowers, predicts that it will purchase 240,000 spark plugs next year. Lawnox estimates that 20,000 spark plugs will be required each month. A supplier quotes a price of...
-
Long Companys variables expenses are 60% of sales. A $1,200 increase in the companys fixed expenses will increase the break-even point in sales by $ $3,000.
-
How would you have suggested Gov. Blagojevich comport himself publicly, while the charge against him were pending?
-
Use the file statepop.dat for this problem. a. Plot the total number of veterans versus the probabilities of selection i. Does your plot indicate that unequal-probability sampling will be helpful...
-
Prevosti Farms and Sugarhouse pays its employees according to their job classification. The following employees make up Sugarhouse's staff: Payroll Payroll Register Register Thomas Avery Towle...
-
Name: Course: Worksheet Lab Experience 5 Logic Circuits (A) Exercise 5.1 Truth table for the example circuit A B Output Value 0 0 1 1 0 1 1 Exercise 5.2 A slight change in the example circuit...
-
Stanley Medical Hospital is a non-profit and a non-chartered hospital planning to acquire several hospitals in the area. The hospital is researching financial options since they want to expand into...
-
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $12,000. They expect to use the...
-
Pacifico Company, a US-based importer of beer and wine, purchased 1,800 cases of Oktoberfest-style beer from a German supplier for 522,000 euros. Relevant U.S. dollar exchange rates for the euro are...
-
The covariance of returns on Asset A and Asset B are negative. What does this tell us about the correlation coefficient for their returns? If we form a portfolio comprised of Asset A and Asset B,...
-
The trade-off theory relies on the threat of financial distress. But why should a public corporation ever have to land in financial distress? According to the theory, the firm should operate at the...
-
Determine expressions for the thermal expansion coeffi cient, the isothermal compressibility, and the JouleThomson coeffi cient for a gas that obeys the van der Waals equation of state, in terms of...
-
Durler Company purchased equipment on January 2, 2008, for $112,000. The equipment had an estimated useful life of 5 years with an estimated salvage value of $12,000. Durler uses straight-line...
-
Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included...
-
In this simulation, you are asked to address questions regarding the accounting for property, plant, and equipment. Prepare responses to allparts. KWW Professional_Simulation Property, Plant, and...
-
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company...
-
Brief Exercise 10-6 Flint Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $327,600. The estimated fair values of the assets are land $62,400, building...
-
"faithful respresentation" is the overriding principle that should be followed in ones prepaparation of IFRS-based financial statement. what is it? explain it fully quoting IAS. how this this...
Study smarter with the SolutionInn App