If an investor had a choice of receiving $1,000 today, or $1,000 in five years, which would the average investor prefer?
A) $1,000 in five years because they are not good at saving money.
B) $1,000 today because it will be worth more than $1,000 received in five years.
C) $1,000 in five years because it will be worth more than $1,000 received today.
D) Investors would be indifferent to when they would receive the $1,000.
E) None of the above.

Question

Quizplus · Accepted Answer

The average investor would prefer to receive $1,000 today rather than in five years because of the time value of money. Money received today could be invested and earn interest over the five-year period, resulting in a higher total value than $1,000 received in the future. Additionally, there is uncertainty about the future value of money due to inflation or other factors, making receiving money sooner a safer choice.

If an Investor Had a Choice of Receiving $1,000 Today