Explain Why $1 Today Is Not Equal to $1 in the Future

question 116

Essay

Explain why $1 today is not equal to $1 in the future. Why is understanding this concept particularly important for tax planning? What tax strategy exploits this concept?

---

Definitions:

Mean

Calculated by dividing the total of the numbers by their quantity, the average represents the mean value of a set.

Median

The middle value in an ordered list of numbers, effectively dividing the dataset into two halves.

Central Location

The midpoint or center of a dataset where it tends to cluster around.

Sample Mean

The average of a set of numerical values drawn from a larger population, often used to estimate the population mean.