If the accumulated value at time n of $1 per year paid continuously each year for n years is 25% more than the accumulated value at time n of $1 per year paid at the end of each year for n years under the same interest rate assumption, then how does the present value at time zero of an annuity of $1 per year paid at the end of each year for n years compare to the present value of an annuity of $1 per year paid continuously each year for n years? A. The annuity immediate is about 15% less B. The annuity immediate is about 20% less C. The annuity immediate is about 25% less D. The annuity immediate is about 25% greater E. Cannot be determined from the information given.
If the accumulated value at time n of $1 per year paid continuously each year for n years is 25% more than the accumulated value at time n of $1 per year paid at the end of each year for n years under the same interest rate assumption, then how does the present value at time zero of an annuity of $1 per year paid at the end of each year for n years compare to the present value of an annuity of $1 per year paid continuously each year for n years? A. The annuity immediate is about 15% less B. The annuity immediate is about 20% less C. The annuity immediate is about 25% less D. The annuity immediate is about 25% greater E. Cannot be determined from the information given.
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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Transcribed Image Text:If the accumulated
value at time n of $1 per year
paid continuously each year for n years is 25%
more than the accumulated value at time n of $1
per year paid at the end of each year for n years
under the same interest rate assumption, then
how does the present value at time zero of an
annuity of $1 per year paid at the end of each
year for n years compare to the present value of
an annuity of $1 per year paid continuously each
year for n years?
A. The annuity immediate is about 15% less
B. The annuity immediate is about 20% less
C. The annuity immediate is about 25% less
D. The annuity immediate is about 25% greater
E. Cannot be determined from the information
given.
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