Linda Reed, an executive at VIP Inc. has earned a performance bonus. She has the option of accepting $80,000 now or $130,000 5 years from now. What would you advise her to do? Explain and support with calculations. Calculate what rate Linda would be indifferent between these two performance bonus options. Using the table, select rate for the discount factor that matches the closest to your calculation. If using Excel or financial calculator, round interest rate to the nearest whole number (i.e., 0.0968 = 10%). Answer______

Based on the rate calculated above, select the best option for Linda.

A.If the current interest rate is 9%, Linda should choose to defer her payment and receive $130,000 5 years from now.

B.If the current interest rate is 8%, Linda should choose to accept the immediate payment of $80,000.

C.If the current interest rate is 11%, Linda should choose to defer her payment and receive $130,000 5 years from now.

D.If the current interest rate is 7%, Linda should choose to accept the immediate payment of $80,000.