Time value of money:
Scenario: You've received an inheritance of $50,000 and are contemplating two options: investing the money or using it for a down payment on a house.
Option 1: Invest the $50,000 in a mutual fund that historically generates an average annual return of 7%.
Option 2: Use the $50,000 as a down payment on a house that costs $250,000. The mortgage interest rate is 4% per year for a 30-year term.
Assuming both investments or options are held for 30 years, calculate the future value of each opportunity to see which one might yield more.