You Have Won a Contest and Are Allowed to Choose

question 60

Multiple Choice

You have won a contest and are allowed to choose between two prizes. One option is to receive $200 today and another $200 one year from now. The second option is $100 today and an additional $325 one year from now. At what interest rate (if any) is the present value of the two prizes identical?

• A) 0 percent
• B) 5 percent
• C) 10 percent
• D) 25 percent
• E) none of the above

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Definitions:

Thebes

An ancient Egyptian city located along the Nile river, known for its wealth, art, and architectural sites like the Karnak Temple and the Valley of the Kings.

Old Kingdom

The period in ancient Egyptian history characterized by the construction of the pyramids, spanning from around 2686 to 2181 BCE.

Valley Temple

The temple closest to the Nile River, associated with each of the Old Kingdom pyramids at Gizeh in ancient Egypt.

Mortuary Temple

Ancient temples erected for the worship of deceased pharaohs or rulers, often part of their tomb complex in Egypt and other ancient cultures.