You Have Some Property for Sale and Have Received Two

question 220

Multiple Choice

You have some property for sale and have received two offers. The first offer is for $189,000 today
in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years
from today. If the applicable discount rate is 8.75%, which offer should you accept and why?

• A) You should accept the $189,000 today because it has the higher present value.
• B) You should accept the $189,000 today because it has the lower future value.
• C) You should accept the second offer because you will receive $200,000 total.
• D) You should accept the second offer because you will receive an extra $11,000.
• E) You should accept the second offer because it has a present value of $194,555.42.

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Definitions:

Self-Regulation

The regulation of the conduct of a professional group by members of the group. Self-regulation involves establishing ethical or professional standards of behavior with which members of the group must comply.

Professions

Occupations or career paths requiring specialized knowledge and often long and intensive academic training.

Nonregulation

The absence of formal rules, controls, or oversight by an authoritative body in a particular area of activity.

Higher Salaries

Compensation levels that are above average or higher than what is typically offered for similar positions or roles in a given industry.