# FINANCE

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Your uncle offers you a choice of \$30,000 in 50 years or \$95 today. If money is
discounted at 12 percent, which should you choose?

• FINANCE -

The present discounted value of \$30,000 is about \$104. However, I'd still take the \$95. I'll be over 100 in 50 years and, well, whats the point? (Actually, this means my own personal discount rate is more than 12%)

• FINANCE -

we have to discount the value of the future money (to compare apples to apples)
and compare what is the value of 30000 in today's money :

PV = present value

PV(30000) = 30000 / (1+0,12)^50

PV(30000) = \$103.8

As PV(30000) > \$95 you'd better wait 50 years.

Your age doesn't play any role in this mathematical problem.

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