Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
1.Which of the following statements is CORRECT?
Statement 1. The difference between the PV of an annuity due and the PV of an ordinary annuity is that each of the payments of the annuity due is discounted by one more year (period).
Statement 2. The difference between an ordinary annuity and an annuity due is that each of the payments of the annuity due earns interest for one additional year (period).
Statement 3. An annuity is a series of equal payments made at fixed equal-length intervals for a specified number of periods.
Statement 3 only.
All of the statements are correct.
None of the statement is correct.
Statement 1 only.
Statement 2 only.
Given some amount to be received several years in the future, if the interest rate increases, the present value of the future amount will
Be higher
Be variable.
Be lower.
Cannot tell.
Stay the same.
WITH EXPLANATION PLEASE
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