FN310 Homework 1 1. You are comparing two investment options. The cost to invest in either option is the same today. Both options will provide you with $20,000 of income. Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each. Option 8 pays five annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? A. Option A is preferable because it is an annuity due B. Option B has a higher present value than option A given a positive rate of return. C. Option A is the better choice of the two given any positive rate of return. D. Option B has a lower future value at year 5 than option A given a zero rate of return. E. Both options are of equal value given that they both provide $20,000 of income You have your choice of two investments. "A" has a stated rate of 10% with monthly compounding and pays 9.75% with daily compounding, what is the effective annual rate of the best alternative? A. 10.25% B. 9.47% C. 10.47% D. 9.75% E. Can't calculate with the information given The stated rate of interest is 10%, which form of compounding will give the highest effective rate of interest? A. Continuous compounding. B. Annual compounding. C. Daily compounding D. Monthly compounding. E. It is impossible to tell without knowing the term of the loan. 3 Find the present value of $5,325 to be received in one period if the rate is 65%. A. $5,000.00 B. $5,023.58 C. $5,644.50 D. $5,671.13 E. None of the above. 4, Bradley Snapp has deposited $7,000 in a guaranteed investment account with a promised rate of 6% compounded annually. He plans to leave it there for 4 full years when he will make a down payment o after graduation. How much of a down payment will he be able to make? A. $1,960.00 B. $2,175.57 5, C. $8,960.00 D. $8,837.34 E. $9,175.57