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You have recently accepted a one-year employment term by a firm. The firm has given...

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Finance

You have recently accepted a one-year employment term by a firm. The firm has given you the option of receiving your salary as a lump sum value of $32,000 at the end of the year or as 12 monthly payments of $2,400 starting one month after you start work. If your relevant discount rate is 2 percent per month, then which salary options would you prefer?

1 The lump sum payment, since it has the smaller future value.

2 Monthly payments, since you do not have to wait so long to receive your money.

3 Either one, since they have the same present value.

4 The lump sum payment, since it has the larger present value

5 Monthly payments, since it has the larger present value.

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