Homework answers / question archive / Consider the following situation: Suppose you are given the option between receiving a $100 tax-free payment now (mailed to your address today) or a larger tax-free payment mailed to your address twelve (12) months from now

Consider the following situation: Suppose you are given the option between receiving a $100 tax-free payment now (mailed to your address today) or a larger tax-free payment mailed to your address twelve (12) months from now

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Consider the following situation:

Suppose you are given the option between receiving a $100 tax-free payment now (mailed to your address today) or a larger tax-free payment mailed to your address twelve (12) months from now.  The payment mailed twelve months from now is higher to compensate you for waiting.  You can only receive one of the two payment options, which are guaranteed.

Question

What is the minimum amount of money that you would accept 12 months from now instead of getting a $100 check today?

Here are the options from which you should choose one amount:

$102, $104, $106, $108, $110, $112, $114, $116, $118, $120, $130, $140, $150, $160, more than $160