Question

Assume a prepayment is made six months in advance of delivery of a product. The seller is likely to do which of the following with respect to the time value of money over the life of the contract?

Answer 1

The seller is likely to benefit from the prepayment by capitalizing on the time value of money.

Step-by-step explanation:

The seller is likely to benefit from the prepayment made six months in advance of delivery of the product. This is because the seller can use the prepayment funds to invest or earn interest during those six months. By capitalizing on the time value of money, the seller can potentially generate additional income or mitigate any financial risks associated with the contract.