Which of the following options would you choose to have if the rate of discount is 20 percent?
A)$300 in one year
B)$350 in two years
C)$420 in three years
D)$1500 in ten years

Question

Quizplus · Accepted Answer

If we choose option A, we will receive $300 after one year. 
If we have a 20% discount rate, the present value of $300 after one year will be:
PV = FV / (1+r)^t
where
FV = $300
r = 0.2 (20%)
t = 1 year

PV = 300 / (1+0.2)^1
PV = $250

Therefore, the present value of option A is $250, which is higher than the present values of options B, C, and D. Thus, option A is the best choice.

Which of the Following Options Would You Choose to Have