A University of Iowa Basketball Standout Is Offered a Choice

question 64

Multiple Choice

A University of Iowa basketball standout is offered a choice of contracts by the New York Liberty. The first one gives her $100,000 one year from today and $100,000 two years from today. The second one gives her $132,000 one year from today and $66,000 two years from today. As her agent, you must compute the present value of each contract. Which of the following interest rates is the lowest one at which the present value of the second contract exceeds that of the first?

• A)7 percent
• B)8 percent
• C)9 percent
• D)10 percent

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Definitions:

Labor-Intensiveness

The characteristic of requiring a high amount of manual labor input relative to other inputs like machinery or capital.

High-Maintenance

Refers to things or people requiring a lot of time, attention, or money.

Very Labor-Intensive

Involving or requiring strenuous effort; physically demanding.

Nonrenewable Sources

energy sources that cannot be replenished in a short period, like fossil fuels.