Answer the following four questions and please assume that you have absolute trust in the person presenting the offer:
1) Would you prefer A) Rs 10 paid to you one month from today, or B) Rs 10 paid to you four months from today?
2) Would you prefer A) Rs 10 paid to you one month from today, or B) Rs 12 paid to you four months from today?
3) Would you prefer A) Rs 10 paid to you one month from today, or B) Rs 14 paid to you four months from today?
4) Would you prefer A) Rs 10 paid to you one month from today, or B) Rs 16 paid to you four months from today?
If you chose B for the first question, than you either believe you will be unemployed in four months, don’t believe in your self control or have a fetish for delayed gratification.
If you chose A for the first question but B for the second through fourth than you have made a sound decision based on your calculus of the interest rate of this offer.
If you chose A for the first and second question, but b for the third or fourth, you definitely want your money now, but you know you can’t turn down a deal that good.
If you chose A for all four questions than you might be hungry, untrusting, poor at math, or an addict. You also very well might be a microfinance customer who has a business that shows no prospect for growth. If you want to know why, read this.
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