assuming the interest rate is 6 percent, which of the following has the greatest present value? a. $300 paid in two years b. $100 paid today plus $100 paid in one year plus $100 paid in two years c. $150 paid in one year plus $140 paid in two years d. $285 today

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21-10-2022
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assuming the interest rate is 6 percent, which of the following has the greatest present value? a. $300 paid in two years b. $100 paid today plus $100 paid in one year plus $100 paid in two years c. $150 paid in one year plus $140 paid in two years d. $285 today

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shardiksh890 shardiksh890 · Answer 1 · 2022-10-25T15:17:56+02:00

$285 today has the greatest present value assuming the interest rate is 6 percent. This is due to time value of money.

Any dollar paid today has more value.

The time value of money is a finance rule that states that the present value of a dollar is greater than the future value of a dollar.

This ideology holds true since invested money today can possibly grow into a larger sum in the future.

The time value of money is used to make long-term strategic financial decisions including whether to allocate resources in a project or even which cash flow sequence is most advantageous.

Learn more on time value of money-

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