You are considering two work contracts, each of which lasts for five years. The two contracts are summarized in the following table. $$\begin{array} { | c | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Contract } \
\text { One }
\end{array} & \begin{array} { c }
\text { Contract } \
\text { Two }
\end{array} \
\hline 1 & \$ 25,000 & \$ 55,000 \
\hline 2 & \$ 35,000 & \$ 65,000 \
\hline 3 & \$ 45,000 & \$ 25,000 \
\hline 4 & \$ 55,000 & \$ 35,000 \
\hline 5 & \$ 65,000 & \$ 45,000 \
\hline
\end{array}$$ Assume that you will be paid at the end of each year. Contract 1 includes a signing bonus of $5,000 to be paid at the beginning of year 1, whereas contract 2 does not include a signing bonus. If the interest rate is 5 percent, which is the better offer?

Question

You are considering two work contracts, each of which lasts for five years. The two contracts are summarized in the following table. $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Contract } \
\text { One }
\end{array} & \begin{array} { c } 
\text { Contract } \
\text { Two }
\end{array} \
\hline 1 & \$ 25,000 & \$ 55,000 \
\hline 2 & \$ 35,000 & \$ 65,000 \
\hline 3 & \$ 45,000 & \$ 25,000 \
\hline 4 & \$ 55,000 & \$ 35,000 \
\hline 5 & \$ 65,000 & \$ 45,000 \
\hline
\end{array}$$ Assume that you will be paid at the end of each year. Contract 1 includes a signing bonus of $5,000 to be paid at the beginning of year 1, whereas contract 2 does not include a signing bonus. If the interest rate is 5 percent, which is the better offer?

Quizplus · Accepted Answer

The Answer of You are considering two work contracts, each of which lasts for five years. The two contracts are summarized in the following table. $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Contract } \
\text { One }
\end{array} & \begin{array} { c } 
\text { Contract } \
\text { Two }
\end{array} \
\hline 1 & \$ 25,000 & \$ 55,000 \
\hline 2 & \$ 35,000 & \$ 65,000 \
\hline 3 & \$ 45,000 & \$ 25,000 \
\hline 4 & \$ 55,000 & \$ 35,000 \
\hline 5 & \$ 65,000 & \$ 45,000 \
\hline
\end{array}$$ Assume that you will be paid at the end of each year. Contract 1 includes a signing bonus of $5,000 to be paid at the beginning of year 1, whereas contract 2 does not include a signing bonus. If the interest rate is 5 percent, which is the better offer?

You Are Considering Two Work Contracts, Each of Which Lasts