According to the Theory Underlying the Present-Value Formula, Would a Rational

question 65

Multiple Choice

According to the theory underlying the present-value formula, would a rational individual prefer to receive (a) $75 one year from now, (b) $85 two years from now, or (c) $90 three years from now, or would he be indifferent between all three choices? Assume that the relevant annual market interest rate is 10 percent and will remain at 10 percent for the next three years?

• A)He will prefer $75 one year from now.
• B)He will prefer $85 two years from now.
• C)He will prefer $90 three years from now.
• D)He will be indifferent between all three choices.

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Definitions:

Dissimilar Jobs

Positions or tasks that are distinctly different in nature, requiring unique skills and capabilities.

Overall Value

The combined qualitative and quantitative importance, worth, or usefulness of something, taking into account all its attributes and aspects.

Job-Based Pay System

A compensation strategy where pay is based on the job itself, rather than the skills or performance of the individual holding the job.

Pay Increases

Adjustments made to employees' salaries to reflect changes in performance, inflation, or market rates.