You Are Comparing Two Investment Options

question 98

Multiple Choice

You are comparing two investment options.The cost to invest in either option is the same today.Both options will provide you with $20,000 of income.Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each.Option B pays five annual payments of $4,000 each.Which one of the following statements is correct given these two investment options?

• A)Option A is preferable because it is an annuity due.
• B)Option B has a higher present value than option A given a positive rate of return.
• C)Option A is the better choice of the two given any positive rate of return.
• D)Option B has a lower future value at year 5 than option A given a zero rate of return.
• E)Both options are of equal value given that they both provide $20,000 of income.

Understand the concept and criticisms of merit pay plans.

Recognize the dependency of merit pay plans on effective performance appraisal systems.

Comprehend different types of incentive pay plans, including differential piece rate and standard hour plans.

Understand the principles and operation of straight piecework programs.

---

Definitions:

Conflict Resolution

The process by which two or more parties find a peaceful solution to a dispute, disagreement, or divergence of views and interests.

Free Association

A psychoanalytic technique in which a patient says whatever comes to mind, intended to reveal unconscious thoughts and feelings.

Oral Stage

A phase in Freud's psychosexual development theory during which an infant's pleasure centers on the mouth.

Exploration

The action of traveling or searching through an unfamiliar area to learn about it or discover new information.