Jamie Is a Self-Employed Consultant

question 261

Multiple Choice

Jamie is a self-employed consultant. A prospective client has offered her three payment options. Jamie is currently earning 8.5% on her funds. Which one of the following statements is correct concerning Jamie's payment options?

Option 1: $10,000 today plus $25,000 at the end of year 2
Option 2: $5,000 today plus $9,000 at the end of year 1 and $22,000 at the end of year 2
Option 3: $36,000 at the end of year 2

• A) At a 2% rate of return Option 3 is the best choice.
• B) At a 6% rate of return Option 1 is the worst choice.
• C) At an 8.5% rate of return Option 2 is the best choice.
• D) At a 0% rate of return all options are equivalent.
• E) At a 6% rate of return, Option 1 is the best choice.

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Definitions:

Vigour

The physical strength, energy, and enthusiasm displayed by individuals, often associated with high levels of activity and productivity.

Dedication

A commitment to a task or purpose, characterized by a willingness to put in effort and time towards achieving specific goals.

Absorption

The degree to which individuals are engrossed or fully immersed in activities, potentially affecting their attention and productivity.

Mental Illness

A broad range of medical conditions that affect a person's thinking, feeling, mood, or behavior, such as depression, anxiety disorders, schizophrenia, and bipolar disorder.