Suppose Emilio offers you $500 today or $X in 10 years.If the interest rate is 6 percent,then at what value of X would you be indifferent between the two options?
A)X = 809.33
B)X = 855.56
C)X = 895.42
D)X = 916.74

Question

Quizplus · Accepted Answer

The future value of $500 compounded annually at 6% for 10 years is calculated as $500 * (1 + 0.06)^10 = $895.42. Thus, you would be indifferent if X equals $895.42.

Suppose Emilio Offers You $500 Today or $X in 10