Q Suppose the interest rate is 38 a Having 650 today is equi

Q:

Suppose the interest rate is 3.8%.

a. Having $650 today is equivalent to having what amount in one? year?It is equivalent to $??. (Round to the nearest? cent.)

b. Having $650 in one year is equivalent to having what amount? today?It is equivalent to $??. ? (Round to the nearest? cent.)

c. Which would you? prefer, $650today or $650 in one? year? Does your answer depend on when you need the? money? Why or why? not?

?\"Because money today is worth more than money in the? future, $650 today is preferred to $650 in one year. This answer is correct even if you? don\'t need the money? today, because by investing the $650 you receive today at the current interest? rate, you will have more than $650 in one? year.\"Is the above statement true or? false???

Solution

a. amount in 1 year = 650 * 1.038 = 674.70

b. amount today = 650/1.038 = 626.20

c. The statement mentioned is true