Jamie Is a Self-Employed Consultant

question 279

Multiple Choice

Jamie is a self-employed consultant. A prospective client has offered her three payment options. Jamie is currently earning 8.5% on her funds. Which one of the following statements is correct
Concerning Jamie's payment options?
Option 1: $10,000 today plus $25,000 at the end of year 2
Option 2: $5,000 today plus $9,000 at the end of year 1 and $22,000 at the end of year 2
Option 3: $36,000 at the end of year 2

• A) At a 2% rate of return Option 3 is the best choice.
• B) At a 6% rate of return Option 1 is the worst choice.
• C) At an 8.5% rate of return Option 2 is the best choice.
• D) At a 0% rate of return all options are equivalent.
• E) At a 6% rate of return, Option 1 is the best choice.

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Definitions:

Contrast Error

A performance rating error in which an employee’s evaluation is biased either upward or downward because of comparison with another employee just previously evaluated

Recency Error

A common mistake in performance evaluation where the most recent behavior of an employee disproportionately influences the overall assessment.

Halo Error

A bias in performance evaluations where the assessor allows one positive characteristic of the person being evaluated to influence their judgment on other unrelated characteristics.

Critical Incidents Method

A performance appraisal method that focuses on the most significant events (or incidents) involving the employee during the review period.