You Are Considering Two Equally Risky Annuities, Each of Which

question 82

Multiple Choice

You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is correct?

• A) The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value of DUE.
• B) The present value of DUE exceeds the present value of ORD, while the future value of DUE is less than the future value of ORD.
• C) The present value of ORD exceeds the present value of DUE, and the future value of ORD also exceeds the future value of DUE.
• D) The present value of DUE exceeds the present value of ORD, and the future value of DUE also
• Exceeds the future value of ORD.

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