09 Nov why dollars worth less tomorrow
There are three reasons why a dollar tomorrow is worth less than a dollar today:
- Individuals prefer present consumption to future consumption. To induce people to give up present consumption you have to offer them more in the future.
- When there is monetary inflation, the value of currency decreases overtime. The greater the inflation, the greater the difference in value between a dollar today and a dollar tomorrow.
- If there is any uncertainty (risk) associated with the cash flow in the future, the less that cash flow will be valued.
Discussion Instructions:
If we have the option of receiving $1,000 today, or $1,000 a year from now, we will choose to get the money now. There are several reasons for selecting to get the money immediately.
Based on your knowledge of TMV, defend the reason for receiving the $100 today.
- Extensively discuss FIVE reasons why you would receive the money today
- Include the appropriate TMV calculations in your defense
- State your argument for investment options, which will help to safeguard your financial stability in the future, use the appropriate TMV calculations for support.
What if you had the choice of $1,000 today or $1,100 a year from now?
- Which will you choose and state why? Use the appropriate TMV calculations for support your decision.
Requirements:
Minimum 600 words
- Introduction: provide a brief summary of what you are discussing
- Body: respond to the discussion instructions
- Conclusion: share closing thoughts, what did you learn and the importance of the information
