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:

Rare Coins

Unique or scarce monetary coins which are collected for their historical, cultural, or investment value.

Chinese Gold Panda

The Chinese Gold Panda is a series of gold bullion coins issued by the People's Republic of China, noted for its changing panda-themed designs.

Accountant

A professional responsible for managing and examining financial records, and providing advice on fiscal matters.

Accounting Partnership

A business arrangement where two or more individuals engage in an accounting practice together, sharing profits, losses, and responsibilities.