what option should he choose to have the most money in four years? course hero

What age do you make the most money with a degree?

According to compensation research firm PayScale, full-time workers with Bachelor's degrees tend to make the most money in their 40s and 50s.

How much more is option a worth than Option B?

If you are choosing Option A, your future value will be $10,000 plus any interest acquired over the three years. The future value for Option B, on the other hand, would only be $10,000. So how can you calculate exactly how much more Option A is worth, compared to Option B? Let's take a look.

What are some options trading strategies for beginners?

There's a variety of strategies involving different combinations of options, underlying assets, and other derivatives. Basic strategies for beginners include buying calls, buying puts, selling covered calls and buying protective puts. There are advantages to trading options rather than underlying assets,...

How much would you have if you invested $10450 a year?

If the $10,450 left in your investment account at the end of the first year is left untouched and you invested it at 4.5% for another year, how much would you have? To calculate this, you would take the $10,450 and multiply it again by 1.045 (0.045 +1).

What Is the Time Value of Money?

If you're like most people, you would choose to receive the $10,000 now. After all, three years is a long time to wait. Why would any rational person defer payment into the future when they could have the same amount of money now? For most of us, taking the money in the present is just plain instinctive.

Future Value Basics

If you choose Option A and invest the total amount at a simple annual rate of 4.5%, the future value of your investment at the end of the first year is $10,450. We arrive at this sum by multiplying the principal amount of $10,000 by the interest rate of 4.5% and then adding the interest gained to the principal amount:

Present Value Basics

If you received $10,000 today, its present value would, of course, be $10,000 because the present value is what your investment gives you now if you were to spend it today. If you were to receive $10,000 in one year, the present value of the amount would not be $10,000 because you do not have it in your hand now, in the present.

Calculating Present Value

Let's walk backward from the $10,000 offered in Option B. Remember, the $10,000 to be received in three years is really the same as the future value of an investment. If we had one year to go before getting the money, we would discount the payment back one year.

Present Value of a Future Payment

Let's up the ante on our offer. What if the future payment is more than the amount you'd receive right away? Say you could receive either $15,000 today or $18,000 in four years. The decision is now more difficult.

The Bottom Line

These calculations demonstrate that time literally is money—the value of the money you have now is not the same as it will be in the future and vice versa. So, it is important to know how to calculate the time value of money so that you can distinguish between the worth of money related options offered to you now and in the future.

How much do men make at age 53?

Meanwhile, men continue seeing increases up until age 53, at which point they’re earning about $95,000. “The smallest gap in raw wages occurs at age 25 (with the typical working man earning $10,600 than the typical working woman), and is largest at age 54 (when the typical man earns $32,800 more than the typical woman),” Payscale reports.

When do full time workers make the most money?

According to compensation research firm PayScale, full-time workers with Bachelor’s degrees tend to make the most money in their 40s and 50s. PayScale also found that when you earn the most during your career depends on your gender: Pay growth for college-educated women essentially stops around age 40. For college-educated men, wages continue ...

When does women's pay increase?

From ages 22 to 33, women’s pay actually grows slightly faster than men’s. However, a shift occurs at age 34, when women’s earning growth starts to slow and men’s remains steady. By age 41, college-educated women see their salaries peak at about $61,000.

What happens when you sell an option call?

When the trader sells the call, the option's premium is collected, thus lowering the cost basis on the shares and providing some downside protection. In return, by selling the option, the trader is agreeing to sell shares of the underlying at the option's strike price, thereby capping the trader's upside potential.

How does a put option work?

A put option works the exact opposite way a call option does, with the put option gaining value as the price of the underlying decreases. While short-selling also allows a trader to profit from falling prices, the risk with a short position is unlimited, as there is theoretically no limit on how high a price can rise.

What are the basic strategies for trading?

Basic strategies for beginners include buying calls, buying puts, selling covered calls and buying protective puts. There are advantages to trading options rather than underlying assets, such as downside protection and leveraged returns, but there are also disadvantages like the requirement for upfront premium payment.

What is an option strategy?

Options offer alternative strategies for investors to profit from trading underlying securities. There's a variety of strategies involving different combinations of options, underlying assets, and other derivatives. Basic strategies for beginners include buying calls, buying puts, selling covered calls and buying protective puts.

What is leveraged option?

Options are leveraged instruments, i.e., they allow traders to amplify the benefit by risking smaller amounts than would otherwise be required if trading the underlying asset itself. A standard option contract on a stock controls 100 shares of the underlying security .

What is call option?

With a call option , the buyer of the contract purchases the right to buy the underlying asset in the future at a predetermined price, called exercise price or strike price. With a put option , the buyer acquires the right to sell the underlying asset in the future at the predetermined price.

What happens if the market prices are unfavorable for option holders?

Should market prices be unfavorable for option holders, they will let the option expire worthless, thus ensuring the losses are not higher than the premium. In contrast, option sellers (option writers) assume greater risk than the option buyers, which is why they demand this premium.

Early life and education

Alfred Kinsey was born on June 23, 1894, in Hoboken, New Jersey, the son of Sarah Ann (née Charles) and Alfred Seguine Kinsey. He was the eldest of three children. His mother received little formal education; his father was a professor at Stevens Institute of Technology .

Initial research on entomology

In the fall of 1914, Kinsey entered Bowdoin College, where he studied entomology under Manton Copeland, and was admitted to the Zeta Psi fraternity, in whose house he lived for much of his time at college. In 1916 Kinsey was elected to the Phi Beta Kappa society and graduated magna cum laude, with degrees in biology and psychology.

Sexology

Kinsey is widely regarded as the first major figure in American sexology; his research helped pave the way for a deeper exploration into sexuality among sexologists and the general public, as well as liberating female sexuality.

Personal life

Kinsey, a Congregationalist, married Clara McMillen in 1921. Their marriage ceremony, like his college graduation, was avoided by Alfred Sr. The couple had four children. Their first son, Donald, born in 1922, died from the acute complications of juvenile diabetes in 1927, just before his fifth birthday.

Legacy

The popularity of Sexual Behavior in the Human Male prompted widespread media interest in 1948. Time magazine declared, "Not since Gone With the Wind had booksellers seen anything like it." A character called "Dr.

Bibliography

Christenson, Cornelia (1971). Kinsey: A Biography. Bloomington: Indiana University Press.

What is bond ladder?

For retirement, individual bonds can be used to form a bond ladder. This strategy uses the maturity dates of bonds to match your financial needs at any given time. This investment structure is often referred to as asset-liability matching or time-segmentation.

What is an immediate annuity?

Purchase Immediate Annuities. Annuities are a form of insurance rather than an investment. Their purpose is to produce income for retirement. The concept is simple—you give the annuity provider a lump sum of money, and they promise to provide you with a set amount of income at specific periods.

Why are high yield bonds better than low yield bonds?

High-yield bonds pay higher coupon (yield) rates but have lower quality ratings. Low-yield have higher quality ratings because they tend to have lower risks. Each can be used differently in a retirement plan. For retirement, individual bonds can be used to form a bond ladder.

What is retirement income fund?

Retirement income funds are a unique type of mutual fund. You place capital in the fund, and they are managed for you. In this case, the managers allocate your money across a diversified portfolio of stocks and bonds for you.

What is closed end fund?

A closed-end fund is an investment company that offered shares in an initial public offering (IPO). After raising funds, they buy securities with them. The company then offers shares on the market for trade.

What is a standard and poor rating?

Standard & Poor's Global Ratings, Moody's, and Fitch Ratings are companies that rate bonds. Bonds are given quality ratings, which give you an idea of the issuer's ability to pay the yields and give back your principal. There are short-term, mid-term, and long-term bonds.

What is REIT in real estate?

A real estate investment trust, or REIT, is like a mutual fund that owns real estate. A team of professionals manage the property, collect rent, pay expenses, collect management fees, and distribute the remaining income to you.