question 32

Consider three investment alternatives: a perpetuity, an ordinary annuity, and an annuity due. All three have the SAME payment amount. The annuity due and the ordinary annuity have the same number of payments (e.g., 6 payments). The interest rate is positive and the same for all three investments. Given this information, which of the following statements is correct? 1) The present value of the ordinary annuity is greater than the present value of the annuity due. 2) None of the answers in this list is the correct answer. 3) The perpetuity and the annuity due have the same present value. 4) The present value of the ordinary annuity is greater than the present value of the perpetuity. 5) The future value of the ordinary annuity is less than future value of the annuity due