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

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Definitions:

Crystallized Intelligence

Crystallized intelligence is the ability to use learned knowledge and experience.

Chemical Symbols

shorthand notations used to represent chemical elements (e.g., H for Hydrogen, O for Oxygen) based on the periodic table.

Practical Intelligence

The intellectual skills used in everyday problem solving. (Sometimes called tacit intelligence.)

Sternberg's Intelligences

A theory proposing three main types of intelligence: analytical (problem-solving abilities), creative, and practical, which help individuals face various life challenges.