What is more valuable:

$1000 today

or

$1000 tomorrow?

Question

What is more valuable:

$1000 today

or

$1000 tomorrow?

BlackTom AI · Accepted Answer

Consider the question about valuing $1000 today versus $1000 tomorrow, which hinges on the time value of money.
Option 1: It depends on interest rates. This statement has some truth to it in a broader sense, because the present value of tomorrow’s $1000 is 1000 / (1 + i) where i is the interest rate, so the comparison does depend on the rate. However, when i is positive, the amount today is worth more since you could invest it and have more than $1000 in the future. In almost all typical scenarios with positive interest, this option is not the best immediate choice, though it highlights the key concept that value shifts with opportunity cost.
Option 2: $1,000 tomorrow. This would ignore the possibility to invest today and earn interest, so it undervalues the option today relative to tomorrow under a common financial framework. It treats both cash flows as if they had the same value without considering time and potential earning power, which is a common misconception when introducing the time value of money.
Option 3: $1,000 today. This is the standard understanding under positive interest conditions: money available now can be invested to produce more later, so receiving $1,000 today has a higher present value than waiting until tomorrow. The core idea is opportunity cost: the value of not having the money today is the potential earnings you forego.
Option 4: They are the same. This would only be true if the interest rate were exactly zero (no opportunity for growth) or if there were some contract forcing equivalence regardless of time. In typical financial reasoning, a positive rate means today’s money is worth more than the same amount tomorrow, so this equality is generally incorrect.

MGT 012Y 001 SQ 2025 Week 2 HW - Time Value of Money Concepts

What is more valuable: $1000 today or $1000 tomorrow?

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