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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Luis and his best friend Faith want to spend as much time as possible at the local amusement park this summer, so they’re going to buy season passes. The passes are normally $120 each, but for three days only, they’re on sale: Buy one, get one half off. Luis agrees to wait in line to buy them the season passes, and they’ll split the cost evenly. How much will Faith owe Luis?

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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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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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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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