Why Does $100 Due One Year from Now Have Less

question 119

Essay

Why does $100 due one year from now have less economic value than $100 has today? What do you need to know before you can determine the difference between the economic values of the two payments?

---

Definitions:

Student T-distributed

A probability distribution used in statistical analyses when the sample size is small and the population standard deviation is unknown.

Test Statistic

A calculated value from sample data used to decide whether to reject the null hypothesis in the context of a hypothesis test.

Normal Distribution

It is a probability distribution that features a symmetric alignment around the mean, emphasizing that data around the mean occur more than data at a distance.

Degrees of Freedom

The count of separate values or amounts that are capable of changing in an analysis while still respecting all limitations.