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Posted on May 18, 2024

You are selling an asset. You can earn an interest rate of 7% (per year) on your savings. You receive the following two (riskless) offers:

Offer 1: Receive $400,000 today Offer 2: Receive $500,000 in 4 years

a) Which offer should you choose? Please substantiate your answer with appropriate calculations. b) At what interest rate would you be indifferent between the two offers? Please substantiate your answer with appropriate calculations.

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