Solved: Therefore 6500 at the end of three years is a higher value, Finance Basics

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Therefore 6500 at the end of three years is a higher value

If given a choice of receiving an insurance settlement at $5,000 today or $6,500 in three years which to choose? The $5,000 that is received today would be invested at 8% interest.

I say choose the $6,500 in three years, because-

PV = 5,000 r = 0.08 and n =3

5000 x (1 + 0.08)^3 = 5000 x (1.2597) = $6,298.5

Therefore, $6,500 at the end of three years is a higher value - Is this correct?

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Finance Basics: Therefore 6500 at the end of three years is a higher value

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