You Have a Chance to Buy an Annuity That Pays

question 129

Multiple Choice

You have a chance to buy an annuity that pays $2,450 at the beginning of each year for 3 years.You could earn 5.5% on your money in other investments with equal risk.What is the most you should pay for the annuity?

• A) $6,973.48
• B) $7,531.36
• C) $6,903.75
• D) $8,298.45
• E) $8,228.71

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Definitions:

Manufacturing Operations

All processes involved in converting raw materials into finished goods, including assembly, labor, and use of machinery.

Unused Capacity

Refers to the available production or service facility space that is not currently being used to generate revenue or produce goods.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not influence future business decisions.

Accumulated Depreciation

The total depreciation expense allocated for a tangible asset over its usage period, reducing its book value.