The interest rate is 7 % Use the concept of present vаluе tо compare $200 to be received in
10 years and $300 to be received in 20 years

The value today for the $200 to be received in 10 years is $102 and the value today for the $300 to be received in 20 years is $78. So, the $200 to be received in 10 years represents a higher value today.

Explanation:

You have to calculate the present value in both cases using the following formula:

PV=FV/(1+i)^n

PV=present value

FV=future value

i=interest rate

n=number of periods of time

-$200 to be received in 10 years:

PV=200/(1+0.07)^10

PV=200/1.07^10

PV=200/1.97

PV=102

-$300 to be received in 20 years:

PV=300/(1+0.07)^20

PV=300/1.07^20

PV=300/3.87

PV=78

The present value indicates the value today for a specific amount in the future. In this case, the value today for the $200 to be received in 10 years is $102 and the value today for the $300 to be received in 20 years is $78. So, the $200 to be received in 10 years represents a higher value today.