An annuity and an annuity due with the same number of payments have the same future value if the interest rate is 10 percent. Which one has the higher payment? They both must have the same payment since the future values are the same. The annuity due has the higher payment. There is no way to tell which has the higher payment. An annuity and an annuity due cannot have the same future value. The annuity has the higher payment.

An annuity and an annuity due with the same number of payments have the same future value if the interest rate is 10 percent. Which one has the higher payment? They both must have the same payment since the future values are the same. The annuity due has the higher payment. There is no way to tell which has the higher payment. An annuity and an annuity due cannot have the same future value. The annuity has the higher payment.

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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Many assets provide a series of cash inflows over time; and many obligations require a series of payments. When the payments are equal and are made at fixed intervals, the series is an annuity. There are three types of annuities: (1) Ordinary (deferred) annuity, (2) Annuity due, and (3) Growing annuity. One can find an annuity's future and present values, the interest rate built into annuity contracts, and the length of time it takes to reach a financial goal using an annuity. Growing annuities are often used in the area of financial planning. Their analysis is more complex and often easier solved using a financial spreadsheet, so we will limit our discussion here to the first two types of annuities. The future value of an ordinary annuity, FVAN, is the total amount one would have at the end of the annuity period if each payment (PMT) were invested at a given interest rate and held to the end of the annuity period. The equation is: FVAN= PMT Each payment of an annuity due is compounded…
Select all the statements that apply to an ordinary annuity. The end of the annuity's term does not coincide with the last payment. The beginning of the annuity's term coincides with the first payment. The beginning of the annuity's term occurs one payment interval before the first payn The end of the annuity's term coincides with the last payment. Need help? Review these concept resources. (1]) Read About the Concept Rate your confidence to submit your answer.
May I ask for an explanation of the question for a better understanding. Thank you! Which of the following statements is NOT TRUE? a. In an annuity due, payments occur at the beginning of the period. b. A perpetuity will never mature at any point in future. c. The present value of a perpetuity can be calculated. d. In an ordinary annuity, payments occur at the beginning of the period.
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. The value of a perpetuity cannot be determined. A perpetuity is a stream of regularly timed, equal cash flows that continues forever. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows. A perpetuity is a stream of unequal cash flows. A local bank's advertising reads: "Give us $45,000 today, and we'll pay you $800 every year forever." If you plan to live forever, what annual interest rate will you earn on your deposit? 2.49% 1.78% O 1.42% O2.14% Oops! When you went in to make your deposit, the bank representative said the amount of required deposit reported in the advertisement was the interest rate earned on your deposited…
Which of the following statement is true? a) An ordinary annuity is an annuity in which the cash flow occurs at the start of each period b) None of the above c) A deferred annuity is an annuity in which the first cash flow occurs at the end of the time period between each subsequent cash flow d) with a credit foncier loan ( a loan for a fixed period with regular repayments) as time passes a smaller proportion of each repayment goes to paying off the interest on the loan
You are considering two equally risky annuities, each of which pays $5,000 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. The present value of ORD exceeds the present value of DUE, and the future value of ORD also exceeds the future value of DUE. b. The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value of DUE. c. The present value of DUE exceeds the present value of ORD, and the future value of DUE also exceeds the future value of ORD. d. 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. e. 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.
Future value for an ordinary annuity and annuity due will be exactly the same if the investment horizon is exactly one year. Group of answer choices True False
A complex annuity makes the following payments. However, the cash flow in Period 4 is missing. The total present value of all cash flows including the missing cash flow in Period 4 is $674.58. The appropriate discount rate / period is 10%. Find the missing cash flow. 0 1 100 2 100 3 100 4 ??? 5 100 6 100
Please answer them in a comprehensice and detailed manner with step-by-step algorithm. Reject any form of excel shhet's solution. Just do it manually.
A 5.66% annual coupon, 19-year bond has a yield to maturity of 4.14%. Assuming the par value is $1,000 and the YTM is expected not to change over the next year, what is the expected Current Yield for this bond? Please share your answer as a %.
Assess the following statements: 1. Simple interest calculations assume the interest earned is never reinvested. II. The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. II. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. IV. For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows. All statements are correct. Two statements are incorrect. O Three statements are incorrect. Only one statement is incorrect.
In excel annuity, we use the exactly same formula for payment beginning or ending payment. Question 1 options: True False

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