You are considering two annuities, both of which make total annuity payments of $10,000 over their
life. Which would be worth more today: annuity A, which pays $1,000 at the end of each year for the
next 10 years, or annuity B, which pays $775 at the end of the ﬁrst year, but the annuity payment
grows by $50 each year, reaching $1,225 at the end of year 10? Are there any circumstances in
which the two would be equal? Explain.

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The Answer of You are considering two annuities, both of which make total annuity payments of $10,000 over their
life. Which would be worth more today: annuity A, which pays $1,000 at the end of each year for the
next 10 years, or annuity B, which pays $775 at the end of the ﬁrst year, but the annuity payment
grows by $50 each year, reaching $1,225 at the end of year 10? Are there any circumstances in
which the two would be equal? Explain.

You Are Considering Two Annuities, Both of Which Make Total