Problem 7-15

You are offered $1,000 after five years (Offer 1) or $150 a year for five 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? -Select-Offer 1Offer 2Item 3

If you can earn 16 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 16 percent on your funds? -Select-Offer 1Offer 2Item

Why are your answers different?

The choices are different as the higher interest rate -Select-favors early paymentsfavors late paymentsItem .