# 1. You are offered three annuities for purchase. Annuities make payments over a specified amount of time. Using the NPV (6.5% discount rate) and IRR methodologies, calculate which annuity is the best choice: # Cost($) Payments ($/yr) Life (yrs.) 1 750 155 9 950 125 (growing @3%/yr.) 10 3 6,000 205 (growing @3.5%/yr.) Forever N 3 A B E H 1 Annuity 2 1 2 3 Which annuity is the best and why? 3 Discount rate 4 Growth rate 5 NPV 6 IRR 7 Cash flows: 8 Start 9 Year 1 10 Year 2 11 Year 3 12 Year 4 13 Year 5 14 Year 6 15 Year 7 16 Year 8 17 Year 9 18 Year 10 and on 10