-Mitch Has Been Offered Three Different Contracts for a Service

question 14

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 3?

• A) $18,497.15
• B) $16,815.56
• C) $24,619.68
• D) $22,381.52

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Definitions:

Homeostasis

The self-regulating process by which biological systems tend to maintain stability while adjusting to conditions for optimal survival.

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