Why Is a Dollar Today More Valuable Than a Dollar

question 14

Multiple Choice

Why is a dollar today more valuable than a dollar a year from now?

• A)The dollar today can be immediately used to buy something.
• B)A dollar a year from now will likely have less purchasing power because of inflation.
• C)The unknown future is riskier than the known present.
• D)all of the above

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Definitions:

Financial Leverage

Financial leverage is the use of borrowed funds to increase the potential return of an investment, magnifying both potential gains and potential losses.

Dividend Rate

The total expected dividend payments from an investment or security expressed on an annual basis.

Premium on Stock

The amount by which the price paid for a stock exceeds its par (or nominal) value, representing additional capital paid in by investors.

Treasury Stock

Stocks that the issuing entity initially sold and then bought back, decreasing the total number of stocks available in the market.