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You are comparing two investment options that each pay 6 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A

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You are comparing two investment options that each pay 6 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options? Assume a positive discount rate. (No calculations needed.) Select one: O A. Both options are of equal value since they both provide $12,000 of income. OB. Option A has the higher future value at the end of Year 3. OC. Option B has a higher present value at Time O. OD. Option B is a perpetuity. o E. Option A is an annuity. Which one of the following statements related to annuities and perpetuities is correct? Select one: a. An ordinary annuity is worth more than an annuity due given equal annual cash flows for 10 years at 7 percent interest, compounded annually. O b. Most loans are a form of a perpetuity. O C. A perpetuity comprised of $100 monthly payments is worth more than an annuity of $100 monthly payments provided the discount rates are equal. O d. The present value of a perpetuity cannot be computed but the future value can. e. Perpetuities are finite but annuities are not

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