-Mitch Has Been Offered Three Different Contracts for a Service

question 4

Multiple Choice

-Mitch has been offered three different contracts for a service he provides. Contract 1: $9,000 received at the beginning of each year for ten years, compounded at a 6 percent annual rate.
Contract 2: $9,000 received today and $20,000 received ten years from today. The relevant interest rate is 12 percent.
Contract 3: $9,000 received at the end of Years 4, 5, and 6. The relevant annual interest rate is 10 percent.
What is the present value of Contract 2?

• A) $9,337.13
• B) $71,117.00
• C) $29,000.00
• D) $15,439.40

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Definitions:

Misinterpret

To understand or interpret incorrectly, often leading to confusion or misunderstanding.

Socioeconomic Status

An indicator of a person's or household's socio-economic standing compared to others, determined by factors like income, educational achievements, and job status.

Poverty

A socioeconomic condition characterized by a lack of access to basic resources and services such as food, clean water, education, and healthcare.

Single-mother Homes

These are households led by a single female caregiver, often focusing on the dynamic challenges and strengths encountered in raising children without a partner.