Question $4$

You are comparing two investments, both of which provide annuity payments in

exchange for a lump sum investment today. Each annuity is for a period of $25$ years and

each pays $$5,000$ a year. You require a $7$ percent return on these investments. Annuity $A$

pays at the beginning of each year and annuity $B$ pays at the end of each year. Given this

information, which one of the following statements is correct?

a$.$ Annuity $B$ is worth more today $($has higher present value$)$ because of the timing of its cash flows.

c$.$ Annuity A has a higher present value but a lower future value than annuity $B.$

d$.$ Annuity A has both a higher present value and a higher future value than annuity $B.$

b$.$ Annuity $A$ is worth more today $($has higher present value$)$ because you will receive $25$ payments

whereas Annuity B only pays $24$ payments.