You are considering two equally risky annuities,each of which pays $5,000 per year for 10 years.Investment ORD is an ordinary (or deferred) annuity,while Investment DUE is an annuity due.Which of the following statements is CORRECT?
A) A rational investor would be willing to pay more for DUE than for ORD,so their market prices should differ.
B) 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.
C) The present value of ORD exceeds the present value of DUE,and the future value of ORD also exceeds the future value of DUE.
D) The present value of ORD exceeds the present value of DUE,while the future value of DUE exceeds the future value of ORD.
E) 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.
Correct Answer:
Verified
Q41: Which of the following statements is CORRECT?
A)
Q42: A $50,000 loan is to be amortized
Q44: Which of the following statements is CORRECT,assuming
Q45: A U.S.Treasury bond will pay a lump
Q46: Which of the following statements is CORRECT?
A)
Q47: Which of the following investments would have
Q48: Which of the following statements regarding a
Q94: The payment made each period on an
Q97: When a loan is amortized, a relatively
Q104: Which of the following statements is CORRECT?
A)
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents