The Equation Means You

question 7

Multiple Choice

The equation means you:

• A)would prefer to receive $386 today than $1,000 in 10 years.
• B)are indifferent between receiving $386 today and $1,000 in 10 years.
• C)would prefer to receive $1,000 in 10 years than $386 today.
• D)are indifferent between receiving $386 today and $1,000 in 100 years.
• E)do not have enough information.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, often reflecting the cost of capital or investment risk.

Quick Assets

Assets that can be quickly converted into cash, usually including cash, marketable securities, and accounts receivable.

Temporary Investments

Assets that are not intended to be held for long periods but are bought with the intention of being converted back into cash within a short timeframe.

Accounts Receivable

The amount customers are required to pay a company for goods or services that have been provided but not yet compensated for.