Principles of Money, Banking & Financial Markets 12th Edition by Lawrence Ritter,William Silber,Gregory Udell

Exercise 7

As an aspiring, brilliant economist, you receive simultaneous job offers from two companies. Get Rich Amazingly Fast Technologies (GRAFT) makes a contract offer where you receive a $50,000 signing bonus and $80,000 at the end of each subsequent year for the next 5 years when your employment with GRAFT will come to an end. SAFe (Securing Assets Forever) makes a 5-year employment offer without a signing bonus but agrees to pay you $95,000 at the end of each year. If the interest rate is 4 percent and, besides the pay, the jobs are equally appealing, should you accept the GRAFT or SAFe offer (Harder: For what range of interest rates is the GRAFT offer superior to the SAFe offer )