Calculate the Difference in the Current Economic Values of the Following

question 191

Multiple Choice

Calculate the difference in the current economic values of the following two annuities: Annuity "X": Payments of $10,000 made at the end of each year for the next 35 years.
Annuity "Y": Payments of $10,000 made at the end of each year for the next 55 years.
Use an interest rate of 13% compounded annually for both annuities.

• A) Annuity "Y" is worth $70,248 more than Annuity "X."
• B) Annuity "Y" is worth $26,225 more than Annuity "X."
• C) Annuity "Y" is worth $8,672 more than Annuity "X."
• D) Annuity "Y" is worth $975 more than Annuity "X."
• E) Annuity "Y" is worth $203 more than Annuity "X."

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Definitions:

Marginal Cost

Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It's pivotal in decision-making processes regarding increasing or decreasing production.

Marginal Revenue

The extra financial gain from selling an additional unit of a product or service.

Profit

The profit earned when the revenue generated from a business operation surpasses all its associated expenses, costs, and taxes required for the operation.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single participant can significantly influence price or supply.