We can solve this problem by calculating the present value (PV) of the $310,000 to be received in 14 years, using the formula for present value:

$PV = \frac{FV}{(1 + r)^n}$

Where:

• $FV = 310,000$ (future value)
• $r = 7\%$ or 0.07 (interest rate)
• $n = 14$ years

Part 1: Calculate the Present Value

Let's calculate the present value of $310,000 using the formula.

$PV = \frac{310,000}{(1 + 0.07)^{14}}$

We will now compute this value.

The present value of receiving $310,000 in 14 years at a 7% interest rate is approximately $120,223.34.

Part 2: Which should you choose?

Since the present value of $310,000 in 14 years ($120,223.34) is higher than the $100,000 offered today, you should choose the $310,000 in 14 years.

Correct Answer: B. You should take the $310,000 in 14 years because it has a higher present value today.

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Would you like further details or have any questions? Here are five related questions to deepen your understanding:

1. How does the interest rate affect the present value?
2. What happens if the interest rate increases to 10%?
3. How would the calculation change if the future value was $500,000 instead?
4. What if the time frame was only 10 years instead of 14?
5. Can we use a different formula to assess future value?

Tip: When making decisions on future payments, always compare the present value of each option to determine which is more valuable today.