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Investor A needs $1,000 in 4 years.  Investor B needs $1,000 in 5 years. Who needs to deposit more money today to reach their goal? Select one: a. B b. A=B c. A

Investor A needs $1,000 in 4 years.  Investor B needs $1,000 in 5 years. Who needs to deposit more money today to reach their goal? Select one: a. B b. A=B c. A

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Investor A needs $1,000 in 4 years.  Investor B needs $1,000 in 5 years. Who needs to deposit more money today to reach their goal?

Select one:
a.

B

b.

A=B

c.

A

 

Expert Solution
Step 1

Time value of money concept says that a dollar amount invested today will have more value in future, like in 1 year, in 3 years or in 5 years. This is due to amount of interest earned or gained during the period. 

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