This is “Evaluating Choices: Time, Risk, and Value”, chapter 4 from the book Individual Finance (v. 1.0). For details on it (including licensing), click here.

For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (19 MB) or just this chapter (1 MB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).

Has this book helped you? Consider passing it on:
Creative Commons supports free culture from music to education. Their licenses helped make this book available to you.
DonorsChoose.org helps people like you help teachers fund their classroom projects, from art supplies to books to calculators.

Chapter 4 Evaluating Choices: Time, Risk, and Value

Introduction

Figure 4.1

The land may vary more;

But wherever the truth may be—

The water comes ashore,

And the people look at the sea.

Robert Frost, “Neither Out Far Nor In Deep”Robert Frost, “Neither Out Far Nor In Deep,” Selected Poems of Robert Frost (New York: Holt, Rinehart and Winston, Inc., 1963).

Financial decisions can only be made about the future. As much as analysis may tell us about the outcomes of past decisions, the past is “sunk”: it can be known but not decided upon. Decisions are made about the future, which cannot be known with certainty, so evaluating alternatives for financial decisions always involves speculation on both the kind of result and the value of the result that will occur. It also involves understanding and measuring the risks or uncertainties that time presents and the opportunities—and opportunity costs—that time creates.