You Are Comparing Two Annuities with Equal Present Values

question 370

Multiple Choice

You are comparing two annuities with equal present values. The applicable discount rate is 4.5%. One annuity pays $2,000 each month for twenty years, starting today. How much does the second annuity pay each month for twenty years if it will pay the first payment one month from today?

• A) $2,007.50
• B) $2,008.75
• C) $2,009.00
• D) $2,009.50
• E) $2,010.00

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Definitions:

Keynesian Analysis

An economic theory that emphasizes the role government policies and spending should play in stabilizing the economy, maintaining low unemployment, and controlling inflation.

Aggregate Demand

The total demand for goods and services within a particular market.

Tax Cut

A reduction in the amount of taxes imposed by a government on its citizens.

Government Expenditures

Spending by the government sector including spending on goods and services, public works, and social programs.