Which of the Following Investments Would Have the Highest Future

question 61

Multiple Choice

Which of the following investments would have the highest future value at the end of 10 years? Assume that the effective annual rate for all investments is the same and is greater than zero.

• A) Investment A pays $250 at the beginning of every year for the next 10 years (a total of 10 payments).
• B) Investment B pays $125 at the end of every 6-month period for the next 10 years (a total of 20 payments).
• C) Investment C pays $125 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
• D) Investment D pays $2,500 at the end of 10 years (just one payment).
• E) Investment E pays $250 at the end of every year for the next 10 years (a total of 10 payments).

---

Definitions:

Accounting Equation

A fundamental principle in accounting that states that assets equal liabilities plus equity (Assets = Liabilities + Equity), serving as the foundation for the balance sheet.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations, calculated as current assets divided by current liabilities.

Short-term Obligations

Financial liabilities that are due for payment within one year.

Normal Balance

The side of an account (debit or credit) that is expected to have a higher balance based on the accounting equation.