Suppose You Have a Choice of Two Equally Risky Annuities

question 3

Multiple Choice

Suppose you have a choice of two equally risky annuities, each paying $1,000 per year for 20 years. One is an annuity due, while the other is an ordinary annuity. Which annuity would you choose?

• A) the ordinary annuity
• B) the annuity due
• C) either one because the annuities have the same present value
• D) without information about the appropriate interest rate, we cannot tell which annuity is better

---

Definitions:

Monozygotic (MZ) Twins

Twins that derive from a single zygote that has split into two; identical twins. Each MZ twin carries the same genetic code.

Identical Twins

Twins who develop from a single fertilized egg, hence sharing 100% of their genes, making them genetically identical.

Rh Incompatibility

A condition in which antibodies produced by the mother are transmitted to the child, possibly causing brain damage or death.

Rh-Positive

Refers to the presence of the Rh factor on the red blood cells; an individual with Rh-positive blood type can receive Rh-positive or Rh-negative blood.