You Are Comparing Two Annuities That Offer Regular Payments of $2,500

question 83

Multiple Choice

 You are comparing two annuities that offer regular payments of $2,500 for five years and pay .75 percent interest per month. You will purchase one of these today with a single lump sum payment. Annuity A will pay you monthly, starting today, while annuity B will pay monthly, starting one month from today. Which one of the following statements is correct concerning these two annuities?

• A) These annuities have equal present values but unequal future values.
• B) These two annuities have both equal present and equal future values.
• C) Annuity B is an annuity due.
• D) Annuity A has a smaller future value than annuity B. 
• E) Annuity B has a smaller present value than annuity A.

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Definitions:

Division of Labor

The allocation of different tasks and responsibilities to different individuals or groups, typically to increase efficiency in production or services.

Diffusion

The spread of certain ideas, customs, or practices from one culture to another.

Ideas

Mental representations or thoughts that arise in the mind, ranging from concepts, plans, opinions, to creative innovations.

Cultures

The ideas, customs, social behaviors, products, or ways of life of a particular society, group, place, or time.