If annuity A has 30 payments of $500 at an interest rate of 10% and annuity B ha
ID: 2409841 • Letter: I
Question
If annuity A has 30 payments of $500 at an interest rate of 10% and annuity B has 30 payments of interest rate of value? A. A B. C. Not enough information to determine. part 2, Multiple Choice $500 at an 9%, which one has the higher present 7. Investment A offers a payment of $10,000 to be paid in 3 years. Investment offers a payment of $10,000 to be paid in 4 years. All else equal, which is the better investment? A. A B. C. Not enough information to determine. 8. You are going to invest $1000 for 3 years. You have the following options, which should you choose? A. A simple interest account which pays 4% interest. B. A compound interest account which pays 4% interest. C. Either one. You are indifferent between the two options. You are going to invest $1000 for 1 year. You have the following options, which should you choose? A. A simple interest account which pays 4% interest. B. A compound interest account which pays 4% 9. interest. Either one. You are indifferent between the two options. C.Explanation / Answer
6.
Present value of annuity = Annuity amount*{1-(1+r)-n}/r
Present value of annuity A = $500*(1-1.10-30)/0.10 = $4,713.46
Present value of annuity B = $500*(1-1.09-30)/0.09 = $5,136.83
Annuity A has higher present value
Correct answer is A