Asked by Luthando Bongobi on May 08, 2024
Verified
It would be a mistake to choose the investment that maximizes the present value of your income stream unless you planned to spend your entire wealth in the current time period.
Present Value
The current valuation of a prospective sum of money or cash flow series, factoring in a designated rate of return.
Investment
The allocation of resources, usually money, into assets with the expectation of generating income or profit in the future.
Entire Wealth
The total value of all assets owned by an individual or entity, minus any debts.
- Develop comprehension of the method by which utility functions express consumer priorities between consumption now and in the future.
Verified Answer
SA
Sazal AhmedMay 10, 2024
Final Answer :
False
Explanation :
Maximizing the present value of your income stream is a fundamental principle of investment, aiming to increase the current worth of future cash flows, regardless of spending plans. It does not imply spending all wealth immediately but rather optimizing the value of future income.
Learning Objectives
- Develop comprehension of the method by which utility functions express consumer priorities between consumption now and in the future.