Kick is looking to play for a U.S. MLS team. D.C. United is offering him $50 million for his first year. The Chicago Fire is offering him $25 million his first year and $10 million per year for the following three years. The market interest rate is 5 percent. Which offer is the better deal in terms of present value in millions?
A. D.C. United, because it will pay him $50 million compared with $48.1 million from Chicago Fire
B. D.C. United, because it will pay him $50 million compared with $46.8 million from Chicago Fire
C. Chicago Fire, because it will pay him $52.2 million compared with $50 million from D.C. United
D. Chicago Fire, because it will pay him $55 million compared with $50 million from D.C. United
C. Chicago Fire, because it will pay him $52.2 million compared with $50 million from D.C. United
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According to the quantity theory of money, inflation is caused by
A) the money supply growing slower than real GDP. B) GDP growing faster than the money supply. C) GDP growing at the same rate as the money supply. D) the money supply growing faster than real GDP.
If the Fed's policy reaction function equals r = .02 + p, where r is the real interest rate, p is the inflation rate. If the real rate of interest is set at 5%, then the rate of inflation must be:
A. 4% B. 2%. C. 1%. D. 3%.