You are comparing two investment options.The cost to invest in either option is the same today. Both options will provide you with £20,000 of income.Option A pays five annual payments starting with £8,000 the first year followed by four annual payments of £3,000 each.Option B pays five annual payments of £4,000 each.Which one of the following statements is correct given these two investment options?
A) Both options are of equal value given that they both provide £20,000 of income.
B) Option A is the better choice of the two given any positive rate of return.
C) Option B has a higher present value than option A given a positive rate of return.
D) Option B has a lower future value at year 5 than option A given a zero rate of return.
E) Option A is preferable because it is an annuity due.
Correct Answer:
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Q1: The present value of future cash flows
Q2: The stated rate of interest is 10%.Which
Q4: Which one of the following statements concerning
Q5: The United Sates definition of the Annual
Q7: Which one of the following statements concerning
Q8: A perpetuity differs from an annuity because:
A)perpetuity
Q9: An annuity stream of cash flow payments
Q10: The interest rate expressed in terms of
Q10: An annuity stream where the payments occur
Q11: You are comparing two annuities which offer
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