tmv - Congratulations!!You :AReceive$10,000...

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Congratulations!!! You have won a cash prize! You  have two payment options:  A  - Receive $10,000  now  OR   B -  Receive $10,000 in three years. Which option would you choose? What Is Time Value? If you're like most people, you would choose to  receive the $10,000 now. After all, three years is a  long time to wait. Why would any rational person  defer payment into the future when he or she could have the same amount of money now? For most of us, taking the money in the present is just plain  instinctive. So at the most basic level, the  time  value of money  demonstrates that, all things being  equal, it is better to have money now rather than  later. But why is this? A $100 bill has the same value as  a $100 bill one year from now, doesn't it? Actually,  although the bill is the same, you can do much  more with the money if you have it now because  over time you can earn more  interest       on your  money. Back to our example: by receiving $10,000 today,  you are poised to increase the  future value  of your 
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money by investing and gaining interest over a  period of time. For Option B, you don't have time  on your side, and the payment received in three  years would be your future value. To illustrate, we  have provided a timeline: If you are choosing Option A, your future value will  be $10,000 plus any interest acquired over the  three years. The future value for Option B, on the  other hand, would only be $10,000. So how can  you calculate exactly how much  more  Option A is  worth, compared to Option B? Let's take a look. SEE:  Internal Rate Of Return: An Inside Look Future Value Basics If you choose Option A and invest the total amount  at a simple annual rate of 4.5%, the future value of  your investment at the end of the first year is  $10,450, which of course is calculated by  multiplying the principal amount of $10,000 by the 
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interest rate of 4.5% and then adding the interest  gained to the principal amount:
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