Question

Why would TMCC be willing to accept such a small amount today ($24,099) in exchange for a promise to repay about four times that amount ($100,000) in the future?

a) Inflation
b) Interest
c) Depreciation
d) Economic downturn

Answer 1

TMCC would be willing to accept a smaller amount today in exchange for a promise to repay a larger amount in the future due to interest.

Step-by-step explanation:

The reason why TMCC would be willing to accept a smaller amount today ($24,099) in exchange for a promise to repay a larger amount in the future ($100,000) is interest. When the lender lends money, they expect to earn interest on the loan. The interest compensates the lender for the time value of money and the risk involved in lending.

For example, if TMCC lends $24,099 to a borrower, they would expect the borrower to repay $100,000 in the future, which includes the original amount borrowed and the interest earned over the repayment period.