Consider a financial contract that will make quarterly payments of $8,458 for the next 4 years.

a. How much will you pay for this contract if your discount rate is 11%, compounded monthly?

b. You also have the option to buy the following contract at the same price: You receive $14,000 in Year 1, $8,000 in Year 2, $49,000 in Year 3 and $33,000 in Year 4, but due to its different risk your discount rate is 4% for this contract. Which contact would you buy?