Suppose You Have a Choice of Two Equally Risky Annuities

Multiple Choice

Suppose you have a choice of two equally risky annuities, each paying $1,000 per year for 20 years. One is an annuity due, while the other is an ordinary annuity. Which annuity would you choose?

A) the ordinary annuity
B) the annuity due
C) either one because the annuities have the same present value
D) without information about the appropriate interest rate, we cannot tell which annuity is better