PV options

[WlND]

Hi, could some one check this;

You are being offered a choice of $10.00 today or $20.00 in one year. If the rate of inflation is expected to be 5% and the nominal interest rate is 3% which options should you choose?

FV of 10

10(1.03)/1.05=9.81

so go with the $20 in a year.

I think its wrong...

 

[WlND]

If you deposit $10 in a savings account and 1 year later it's worth $20

So you mean that its ridiculous to assume that the $10 option would be favorable?

Despite the lack of realism, how would you show this conclusion using calculations?