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ou are comparing two annuities. Annity ay $100 at the end of each month for 5 rs. Annuit B pays $100 at the beginning each month for 5 years. The rate of urn on both annuities is 6 percent. Whic

ou are comparing two annuities. Annity ay $100 at the end of each month for 5 rs. Annuit B pays $100 at the beginning each month for 5 years. The rate of urn on both annuities is 6 percent. Whic

Essentials Of Investments
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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2. You are comparing two annuities. Annity A pay $100 at the end of each month for 5 years. Annuit B pays $100 at the beginning of each month for 5 years. The rate of return on both annuities is 6 percent. Which one of the following statements is correct given this information? Explanation Annuity A has a higher future value than Annuity B, but a lower present value than Annuity B. Annuity B has a higher future value than Annuity A, but a lower present value than Annuity A. Annuity B has both a higher present value and a higher future value than Annuity A.
Transcribed Image Text:2. You are comparing two annuities. Annity A pay $100 at the end of each month for 5 years. Annuit B pays $100 at the beginning of each month for 5 years. The rate of return on both annuities is 6 percent. Which one of the following statements is correct given this information? Explanation Annuity A has a higher future value than Annuity B, but a lower present value than Annuity B. Annuity B has a higher future value than Annuity A, but a lower present value than Annuity A. Annuity B has both a higher present value and a higher future value than Annuity A.
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