Question
You are considering two equally risky annuities, each of which pays $15,000 per year for 20 years. Investment ORD is an ordinary (or deferred) annuity,
You are considering two equally risky annuities, each of which pays $15,000 per year for 20 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?
Answer
| If the going rate of interest decreases from 10% to 0%, the difference between the present value of ORD and the present value of DUE would remain constant. | ||
| The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value of DUE. | ||
| The present value of DUE exceeds the present value of ORD, while the future value of DUE is less than the future value of ORD. | ||
| The present value of ORD exceeds the present value of DUE, and the future value of ORD also exceeds the future value of DUE. | ||
| The present value of DUE exceeds the present value of ORD, and the future value of DUE also exceeds the future value of ORD. |
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After The Quality Audit Closing The Loop On The Audit Process
Authors: J. P. Russell, Terry Regel
2nd Edition
0873894863, 978-0873894869
