You Are Comparing Two Investment Options

question 109

Multiple Choice

You are comparing two investment options.The cost to invest in either option is the same today. Both options will provide you with £20,000 of income.Option A pays five annual payments starting with £8,000 the first year followed by four annual payments of £3,000 each.Option B pays five annual payments of £4,000 each.Which one of the following statements is correct given these two investment options?

• A)Both options are of equal value given that they both provide £20,000 of income.
• B)Option A is the better choice of the two given any positive rate of return.
• C)Option B has a higher present value than option A given a positive rate of return.
• D)Option B has a lower future value at year 5 than option A given a zero rate of return.
• E)Option A is preferable because it is an annuity due.

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Definitions:

Discriminatory Questions

Inquiries made during processes like job interviews that are based on, or show bias towards, race, gender, age, religion, nationality, disability or sexual orientation, which are considered unethical and often illegal.

External Recruitment

The process of filling job vacancies with candidates from outside the organization, often to bring in new skills or perspectives.

Realistic Recruitment

An approach to hiring that accurately portrays a job’s responsibilities, benefits, and challenges to potential candidates.

Six-Step Process

A structured approach divided into six phases aimed at achieving a specific objective or solving a particular problem.