Steve Is Offered an Investment Where for Every $1

question 21

Multiple Choice

Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 in fiveyears' time. Steve concludes that in five years' time he will have $1.10 for every $1.00 invested and that this investment will increase his personal value. What is Steve's major error in reasoning when making this decision?

• A) Costs and benefits must be in the same terms to be compared.
• B) The value of the cash he has today is greater than the value of the cash he may have in the future.
• C) There may be other investments that he can make that will offer even bigger benefits.
• D) The investment may have hidden costs that will reduce the amount of benefit he receives.

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Definitions:

Poor Countries

Nations with low levels of income per capita, often characterized by limited industrial development, insufficient basic infrastructure, and a high degree of economic vulnerability.

Goods And Services

Refers to the total set of products and services that are made available for purchase and consumption by individuals and organizations.

Economic Growth

The rise in the real value of goods and services that an economy produces over time, adjusted for inflation.

20th Century

The period from January 1, 1901, to December 31, 2000, characterized by unprecedented technological, cultural, and political changes.