Annuity A has a greater present value than annuity B when cash flows are discounted using the same positive interest rate for each annuity.Which annuity will have the larger future value if compounded at the same interest rate?
A)Annuity A will have a larger future value.
B)Annuity B will have a larger future value.
C)The future values will be the same.
D)There is not enough information to determine which annuity will have a greater future value.

Question

Quizplus · Accepted Answer

If Annuity A has a greater present value than Annuity B when discounted at the same positive interest rate, it means Annuity A starts with a larger initial amount. When compounded at the same rate, Annuity A will grow to a larger future value than Annuity B, assuming the compounding periods are the same for both.

Annuity a Has a Greater Present Value Than Annuity B