Question
Marian Kirk wishes to select the better of two 11 year annuities, Annuity 1 is an ordinary annuity of $1930 per year for 11 years.
Marian Kirk wishes to select the better of two 11 year annuities, Annuity 1 is an ordinary annuity of $1930 per year for 11 years. Annuity 2 is an annuity due of $1810 per year for 11 years. a. Find the future value of both annuities at the end of year 11, assuming that Marian can earn (1) 6% annual interest and (2) 12% annual interest. b. Use your findings in part a to indicate which annuity has the greater future value at the end of year 11 for both the (1) 6% and (2) 12% interest rates. c. Find the present value of both annuities, assuming that Marian can earn (1) 6% annual interest and (2) 12% annual interest. d. Use your findings in part c to indicate which annuity has the greater present value for both (1) 6% interest (2) 12% interest rates. e. Briefly compare, contrast, and explain any differences between your findings using the 6% and 12% interest rates in parts b and d.
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