The longer you wait for a return, the higher the amount expected back. Which statement reflects this relationship?

The longer you wait for a return, the higher the amount expected back. Which statement reflects this relationship?

• A. The higher the amount expected back the longer you wait
• B. The lower the amount expected back the longer you wait
• C. Waiting longer increases risk
• D. Waiting longer does not change the expected amount

Answer: (A)

The idea here is the time value of money: delaying receipt of cash means you forgo the ability to use that money now, so you require more money later to be willing to wait. If you expect a higher payoff, you’re more likely to wait, because the extra amount compensates for the lost use of the money and the risk of waiting. So the statement that the higher the amount expected back, the longer you wait mirrors this compensation for time and delay. The other options either imply the opposite relationship or mix in risk without addressing the direct link between waiting time and the payoff amount.

The idea here is the time value of money: delaying receipt of cash means you forgo the ability to use that money now, so you require more money later to be willing to wait. If you expect a higher payoff, you’re more likely to wait, because the extra amount compensates for the lost use of the money and the risk of waiting. So the statement that the higher the amount expected back, the longer you wait mirrors this compensation for time and delay. The other options either imply the opposite relationship or mix in risk without addressing the direct link between waiting time and the payoff amount.