Question
You are comparing two separate investments. Each one is for a period of 10 years and pays $2,500 a year. You require a 10 percent
You are comparing two separate investments. Each one is for a period of 10 years and pays $2,500 a year. You require a 10 percent return on these investments. Investment A pays at the beginning of each year and investment B pays at the end of each year. Given this situation, which one of the following statements is accurate?
A. | Investment A has a higher present value and a lower future value than investment B | |
B. | Both investments are equally valuable today | |
C. | Investment B is worth more today because of the timing of its cash flows | |
D. | Investment A is worth more today because you will receive ten payments whereas investment B only pays nine payments | |
E. | Investment A has both a higher present value and a higher future value than investment B |
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