​Suppose You Have a Choice Between Receiving a Lump-Sum Payment

question 370

Multiple Choice

​Suppose you have a choice between receiving a lump-sum payment of $10,000 today or four annual payments of $2,750 (with the first payment one year from today) . Of the following, which is the highest annual interest rate at which you would prefer the four annual payments over the lump-sum payment?

• A)2%
• B)​5%
• C)​7%
• D)​10%

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Definitions:

Health Care Entities

Organizations involved in the provision of health care services such as hospitals, clinics, and nursing homes.

Statement of Activities

A financial report that shows all revenue and expenses for a specific period, often used by nonprofit organizations.

Net Assets

The difference between total assets and total liabilities, indicating the actual worth of an organization's equity.

Donor Restrictions

Constraints placed by donors on how their contributions can be used by the receiving organization.