Question

Suppose the interest rate is 3.8%.

a. Having $600today is equivalent to having what amount in one​ year?

b. Having $600in one year is equivalent to having what amount​ today?

c. Which would you​ prefer,$600 today or $600 in one​ year? Does your answer depend on when you need the​ money? Why or why​ not? a. Having$600

today is equivalent to having what amount in one​ year?It is equivalent to

​$nothing .

​(Round to the nearest​ cent.)b. Having

$ 600$600

in one year is equivalent to having what amount​ today?It is equivalent to

​$nothing .

​ (Round to the nearest​ cent.)c. Which would you​ prefer,

$600 today or $600 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,$600 today is preferred to $600 in one year. This answer is correct even if you​ don't need the money​ today, because by investing the $600 you receive today at the current interest​ rate, you will have more than $600 in one​ year." Is the above statement true or​ false?  

▼

True False. ​(Select from the​ drop-down menu.)

Enter your answer in each of the answer boxes.

Answer 1

a)

Having $ 600 today

In one year the amount = 600*(1+ interest rate) = 600*(1+3.8%) = $ 622.8

b)

Future value = $ 600

Worth of 600 in one year as of today= (600)/(1+3.8%) = 600/1.038 = $ 578.03

c)

$ 600 is preferred today to one year hence as by investing that $ 600 you will have more than $ 600 one year hence.

"Because money today is worth more than money in the​ future,$600 today is preferred to $600 in one year. This answer is correct even if you​ don't need the money​today, because by investing the $600 you receive today at the current interest​ rate, you will have more than $600 in one​ year."

This statement is true as the time value of money is always prevalent and it changes with respect to interest rate or the cost of money due to inflation.