A Piece of Property May Be Acquired by Making an Immediate

question 23

Essay

A piece of property may be acquired by making an immediate payment of $125 000 and payments of $37 500 and $50 000 three and five years from now respectively. Alternatively, the property may be purchased by making quarterly payments of $11 150 in advance for five years. Which alternative is preferable if money is worth 12.2% compounded semi-annually?

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Definitions:

Negative Reinforcement

A psychological principle where the removal or avoidance of an unpleasant stimulus as a consequence of a behavior increases the likelihood of that behavior being repeated.

Positive Punishment

A behavior modification technique where an undesirable behavior results in a negative outcome to decrease the likelihood of the behavior reoccurring.

Negative Punishment

A behavior modification technique involving the removal of a desirable stimulus to decrease the likelihood of an unwanted behavior's recurrence.

Negative Reinforcement

The process of strengthening a behavior by removing or avoiding a negative outcome or stimulus.