You Have Recently Accepted a One Year Employment Term by a Firm.The

question 36

Multiple Choice

You have recently accepted a one year employment term by a firm.The firm has given you the option of receiving your salary as a lump sum value of $30,000 at the end of the year or as 12 monthly payments of $2,400 starting one month after you start work.If your relevant discount rate is 2 percent per month,then which salary options would you prefer? (Ignore taxes,risk,and consumption needs. ) Choose the best answer.

• A) The lump sum payment,since it has the larger future value.
• B) Monthly payments,since you do not have to wait so long to receive your money.
• C) Either one,since they have the same present value.
• D) The lump sum payment,since it has the larger present value.
• E) Monthly payments,since it has the larger present value.

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