The following figure shows a graph that compares the present values of two ordinary annuities of $800 quarterly as functions of the number of quarters. One annuity is at an annual rate of 6% compounded quarterly, and the other is at an annual rate of 9% compounded quarterly. Use the graph below to estimate the difference between the present values of these annuities for 25 years (100 quarters).

A) $36,000
B) $4,800
C) $30,000
D) $125
E) $9,586

Question

The following figure shows a graph that compares the present values of two ordinary annuities of $800 quarterly as functions of the number of quarters. One annuity is at an annual rate of 6% compounded quarterly, and the other is at an annual rate of 9% compounded quarterly. Use the graph below to estimate the difference between the present values of these annuities for 25 years (100 quarters). ​
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A) $36,000 
B) $4,800 
C) $30,000 
D) $125 
E) $9,586

Quizplus · Accepted Answer

We can estimate from the graph that the difference in present values of the annuities at 25 years is approximately $9,586. This can be found by subtracting the value of the 6% annuity (which is approximately $137,414) from the value of the 9% annuity (which is approximately $147,000). Therefore, the difference is approximately $9,586.

The Following Figure Shows a Graph That Compares the Present