Appendix C

You are offered $700 after four years (Offer 1) or $150 a year for four years (Offer 2). If you can earn 6 percent on your funds, calculate the future values of both payments. Use Appendix C to answer the question. Round your answers to the nearest dollar. FV_{(Offer 1)}: $ FV_{(Offer 2)}: $

Which offer will you accept? Offer 1 or Offer 2

If you can earn 14 percent on your funds, calculate the future values of both payments. Use Appendix C to answer the question. Round your answers to the nearest dollar. FV_{(Offer 1)}: $ FV_{(Offer 2)}: $

Which offer will you accept, if you can earn 14 percent on your funds? Offer 1 or Offer 2

Why are your answers different?

The choices are different as the higher interest rate ______

favors early payments or favors late payments