<p>The correct opportunity cost should already reflect things like default risk. But equivalence in your case only comes from rounding. The present value of \$100 at 5% discounting is \$95.2381, which is lower than the purchase price of \$95.24. Thus, A is too expensive today, and you would not buy it.</p>

CC BY-SA 4.0
2024-02-12T13:15:04.670Z
Thanks. What would be the argument if they were the same?
monalisa
CC BY-SA 4.0
2024-02-12T13:28:50.883Z
If they were the same, you'd be indifferent. And btw: The title of your question makes no sense here.
VARulle
CC BY-SA 4.0
2024-02-12T14:36:37.637Z
Thank you! I will change the name
monalisa
CC BY-SA 4.0
2024-02-12T11:00:26.373Z
2024-02-12T13:19:50.843Z
2024-02-12T13:19:50.843Z
jpfeifer
<p>Suppose we need to decide if to acquire A now for \$95.24 or in one year for $100. If the opportunity cost is 5% annual, what option would you choose?</p>
<p>My possible solution: as the present value of \$100 is \$95.24 given the discount rate of 5%, the value of A now equals the present value of the future quantity. In this case, I would argue that the opportunity cost includes a notion of risk, and is possible that I would not get exactly $100. But I'm not sure this is correct as, mathematically, options are equivalent.</p>

<definition><value><opportunity-cost>
Purchase price equals present value of future price
monalisa
# Purchase price equals present value of future price

(Asked by: username_0 on 2024-02-11)

Suppose we need to decide if to acquire A now for \$95.24 or in one year for $100. If the opportunity cost is 5% annual, what option would you choose?

My possible solution: as the present value of \$100 is \$95.24 given the discount rate of 5%, the value of A now equals the present value of the future quantity. In this case, I would argue that the opportunity cost includes a notion of risk, and is possible that I would not get exactly $100. But I'm not sure this is correct as, mathematically, options are equivalent.

**Tags:** definition, value, opportunity-cost

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## 1 answers

### Answer by username_1 on 2024-02-12. Score: 0

The correct opportunity cost should already reflect things like default risk. But equivalence in your case only comes from rounding. The present value of \$100 at 5% discounting is \$95.2381, which is lower than the purchase price of \$95.24. Thus, A is too expensive today, and you would not buy it.

> **Comments:**
> **username_0**: Thanks. What would be the argument if they were the same?  
> **username_2**: If they were the same, you'd be indifferent. And btw: The title of your question makes no sense here.  
> **username_0**: Thank you! I will change the name  

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