Question

Discuss how the interest rate performs a key role in allocating resources and calculate the present discounted value of a payment to be received at a future date

Short answer

There is less danger than if the dollar were used in a long-term investment that may or may not produce the desired returns.

Step-by-step solution

Given Information.

This is because a cent today is employed to earn more money in the future, lowering the value of a dollar over time and resulting in a decrease in economic currency value.

Explanation.

• Today’s dollar is additionally more valuable because there's less risk than if the dollar was during a long-term investment, which can or might not yield the expected results.
• On the opposite hand, delaying payment from an investment could also be beneficial if there's a chance to earn interest.
• The longer payment is delayed, the more available earning potential there's. this may be enticing to businesses and will persuade them to require onthe chance of deferment.