5 . Present value of annuities and annuity payments

You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities have the same positive interest rate.

A) An annuity that pays $1,000 at the end of each year

B) An annuity that pays $500 at the end of every six months

C) An annuity that pays $1,000 at the beginning of each year

D) An annuity that pays $500 at the beginning of every six months

You bought an annuity selling at $10,669.17 today that promises to make equal payments at the beginning of each year for the next three years (N). If the annuitys appropriate interest rate (I) remains at 8.00% during this time, what will be the value of the annual annuity payment (PMT)?

A)$3,833.33

B)$4,791.66

C)$5,558.33

D)$5,868.04

You just won the lottery. Congratulations! The jackpot is $10 million, paid in three equal, annual payments. The first payment on the lottery jackpot will be made today. In PV terms, how much did you really win? Use an annual interest rate (I) of 8.00%. In PV terms you won ____ million (All in millions)

A) 9.276

B) 8.589

C) 11.686

D) 10.820