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You are offered ​$100,000 today or ​$300,000 in 13 years. Assuming that you can earn 8​%...

You are offered ​$100,000 today or ​$300,000 in 13 years. Assuming that you can earn 8​% on your​ money, which should you​ choose?

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Answer #1

Lets find today's worth of $300,000 received in 13 years discounted at 8%. If it is above $100,000 we can choose that, else we can choose $100,000 today.

Present value formula:

Where,
PV = Present value
FV = future value
i = interest rate in decimal form
n = number of years.

So clearly second option is better. Because today's worth of $300,000 is more than $100,000 receiving today.

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