Âsuppose you have a choice between receiving a lump-sum payment of $10,000 today or four annual payments of $2,750 (with the first payment today).

of the following, which is the highest annual interest rate at which you would prefer the four annual payments over the lump-sum payment?

a. 2%b. 5%c. â7%d. 10%

a. 2%

Explanation:

That interest rate will be preferred where present value of $2,750 for four years is highest .

To calculate present value for four years , we will use uniform payment table for present value at 2%,5%,7% and 10% rate.

Present value factor

at 2%- 3.8077 value - 2750* 3.8077 = 10471.2

At 5% - 3.5460 value - 2750* 3.5460 = 9751.5

With increase in interest rates , amount will be reduced .

Therefore 2% will be the highest rate acceptable.

a. 2

Explanation:

That interest rate will be preferred where present value of $2,750 for four years is highest .

To calculate present value for four years , we will use uniform payment table for present value at 2%,5%,7% and 10% rate.

Present value factor

at 2%- 3.8077 value - 2750* 3.8077 = 10471.2

At 5% - 3.5460 value - 2750* 3.5460 = 9751.5

With increase in interest rates , amount will be reduced .

Therefore 2% will be the highest rate acceptable.

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.