Multiple Choice
You are considering two equally risky annuities, each of which pays $25,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?
A) if the going rate of interest decreases from 10% to 0%, the difference between the present value of ord and the present value of due would remain constant.
B) a rational investor would be willing to pay more for due than for ord, so their market prices should differ.
C) the present value of due exceeds the present value of ord, while the future value of due is less than the future value of ord.
D) the present value of ord exceeds the present value of due, and the future value of ord also exceeds the future value of due.
E) the present value of ord exceeds the present value of due, while the future value of due exceeds the future value of ord.
Correct Answer:
Verified
Correct Answer:
Verified
Q2: Suppose Randy Jones plans to invest $1,000.He
Q17: Some of the cash flows shown on
Q23: Suppose you just won the state lottery,
Q31: Suppose United Bank offers to lend you
Q60: You just deposited $2,500 in a bank
Q91: Southwestern Bank offers to lend you $50,000
Q110: What's the future value of $1,200 after
Q122: If the discount (or interest) rate is
Q131: If we are given a periodic interest
Q158: Suppose you borrowed $12,000 at a rate