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?

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Definitions:

Lessee

A person or entity that leases an asset from another, the lessor, under the terms of a lease agreement, gaining the right to use the asset for a specified period in exchange for regular payments.

Business Expense

Monetary outlays or costs that are necessary for a company to operate and conduct its business activities.

Leasing Arrangement

A contractual agreement where a lessor allows a lessee to use an asset in exchange for periodic lease payments.

Encumbered Assets

Assets that are used as security or collateral for a loan or debt, restricting their free use or disposal by the owner.