Assume you have the option to choose between receiving a given amount of money 5 years from now or 10 years from now, and the discount rate is positive. Which option has the higher present value?
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1 mark, −0.33MacroeconomicsTime value of money and bond pricingPresent value, discounting and compoundingEasyabout 1 min
UoH 2015 Question 47: Time value of money and bond pricing
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Assume you have the option to choose between receiving a given amount of money M 5 years from now or 10 years from now, and the discount rate is positive. Which option has the higher present value? (A) It depends on the level of the interest rate. (B) Receive the money 5 years from now. (C) Receive the money 10 years from now. (D) Receiving M always has the same present value, independent of the timing.
Time value of money and bond pricing has come up 20 times in 5 exams since 2010.
What this question tests
This question is on Present value, discounting and compounding, part of Time value of money and bond pricing in Macroeconomics.
Comparing money at different dates.
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