Question

A rational person would prefer which of the following cash flows. a. $5,000 per year for 10 years with the first payment made one year from today b. $5,000 per year for 10 years with the first payment made today c. $50,000 paid today d. $25,000 paid today and $25,000 paid next year e. $49,000 paid today

Answer 1

Answer: c. $50,000 paid today.

Explanation:

A rational person rational person would prefer $50,000 paid today. As individuals, we have been shaped in such a way that we live for the present as when we are given an opportunity to receive something now or later, we'll prefer to receive it now.

This is just the normal behavior of a rational human being.