Two Annuities Have Equal Present Values and an Applicable Discount

question 100

Multiple Choice

Two annuities have equal present values and an applicable discount rate of 7.25 percent. One annuity pays $2,500 on the first day of each year for 15 years. How much does the second annuity pay each year for 15 years if it pays at the end of each year? 

• A) $2,331.00 
• B) $2,266.67 
• C) $2,500.00 
• D) $2,390.50 
• E) $2,681.25 

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Definitions:

Pituitary

A small, pea-sized gland located at the base of the brain, responsible for releasing hormones that regulate various bodily functions.

Parathyroid

Small glands located in the neck that regulate calcium levels in the body by producing parathyroid hormone.

Adrenal

Glands located above the kidneys that produce various hormones including adrenaline and cortisol, which regulate metabolism, immune system, and stress response.

Retinopathy

A degeneration of the retina caused by a decrease in blood supply.