Whether the worth of $ 1 , 000 received today and that of $ 1 , 000 received 1 year from now are equal or not.

Question

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Answer 1

Question

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

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Answer 2

Question

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

Answer 6

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

Answer 7

Chapter 15, Problem 1Q

To determine

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Answer 8

Expert Solution & Answer

Explanation of Solution

According to the time value of money, a dollar in the present time is worth more than a dollar in the future. Variables like inflation (v) and interest rate (r) affect the value of money. Inflation means a rise in the price level which depreciates the currency value over time, whereas interest rate is used as a discounting factor. If the sum of $1,000 is leave-in cash as it is, then its value will depreciate because of inflation. If the same amount is deposited in a bank as saving, then the bank will pay some interest on that amount balancing it with the inflation.

Suppose, if the sum of $1,000 received now is deposited in a bank for 1 year, and the interest rate that bank is offering is around 7% . This means, r=7%=0.07. So, the interest amount after 1 year will be,

$1000+r+1,000=1+r×$1000That is,0.07+1×$1000=1,070Therefore, $1,070-$1000=$70interest amount

Hence, the sum of $1000 received today will have a value of $70 more than the sum of $1000 received 1 year after.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 15 - Prob. 1Q Ch. 15 - Prob. 2Q Ch. 15 - Prob. 3Q Ch. 15 - Prob. 4Q Ch. 15 - Prob. 5Q Ch. 15 - Prob. 6Q Ch. 15 - Prob. 7Q Ch. 15 - Prob. 8Q Ch. 15 - Prob. 9Q Ch. 15 - Prob. 10Q

Whether the worth of $ 1 , 000 received today and that of $ 1 , 000 received 1 year from now are equal or not.

Whether the worth of $1,000 received today and that of $1,000 received 1 year from now are equal or not.

Explanation of Solution

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Chapter 15 Solutions