Sharon Smith will receive $1 million in 20 years. The discount rate is 10%. As an alternative, she can receive $200,000 today. Which should she choose?
A) The $200,000 today.
B) The $1 million in 20 years.
C) Both equal the same value.
D) Neither option would be preferred.
A) The $200,000 today.
= ($1,000,000/(1 + 0.10)20 = $149,000
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