Supposed Someone Offered You the Choice of Two Equally Risky

question 10

Multiple Choice

Supposed someone offered you the choice of two equally risky annuities,each paying $10,000 per year for five years.One is an ordinary (or deferred) annuity,the other is an annuity due.Which of the following statements is most correct?

• A) The present value of the ordinary annuity must exceed the present value of the annuity due,but the future value of an ordinary annuity may be less than the future value of the annuity due.
• B) The present value of the annuity due exceeds the present value of the ordinary annuity,while the future value of the ordinary annuity.
• C) The present value of the annuity due exceeds the present value of the ordinary annuity,and the future value of the annuity due also exceeds the future value of the ordinary annuity.
• D) If interest rates increase,the difference between the present value of the ordinary annuity and the present value of the annuity due remains the same.
• E) Both answers a and d are correct.