ou have the choice of two equally risky annuities, each paying $5,000 per year for 8 years. One is an annuity that pays at the beginning of the year and the other is an annuity that pays at the end of the year. If you are going to be receiving the annuity payments, which annuity would you choose to maximize your wealth? A. Since we don't know the interest rate, we can't find the value of the annuities and hence we cannot tell which one is better. B. either one because they have the same present value C. the annuity that pays at the beginning of the year D. the annuity that pays at the end of the year
ou have the choice of two equally risky annuities, each paying $5,000 per year for 8 years. One is an annuity that pays at the beginning of the year and the other is an annuity that pays at the end of the year. If you are going to be receiving the annuity payments, which annuity would you choose to maximize your wealth? A. Since we don't know the interest rate, we can't find the value of the annuities and hence we cannot tell which one is better. B. either one because they have the same present value C. the annuity that pays at the beginning of the year D. the annuity that pays at the end of the year
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
Related questions
Question
You have the choice of two equally risky
A. |
Since we don't know the interest rate, we can't find the value of the annuities and hence we cannot tell which one is better. |
|
B. |
either one because they have the same |
|
C. |
the annuity that pays at the beginning of the year |
|
D. |
the annuity that pays at the end of the year |
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