Suppose you have two clients who need your services for two years. One agreed to pay you $50,000 one year from now and another $50,000 in two years while the other paid $35,000 after one year, but $65,000 after two years
Assuming an interest rate of 10%, which one has a higher present value? Round off to the nearest dollar.
The present value of the first contract is $86,777 and the second one is $85,537.
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What characteristic of monopolistic competition may help to offset the inefficiency of this market structure?
A) Free entry and exit imply that firms produce at minimum long-run average cost. B) Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products. C) Consumers may feel better about the inefficiency if they know that firms earn zero profits. D) Consumers may prefer this outcome to monopoly or monopsony.
If reserves increase by $5 million, what is the difference in the resulting change in checkable deposits when the required reserve ratio is 12.5 percent compared to when it is 10 percent?
A) $12.5 million B) $10 million C) $2.5 million D) $100 million