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You Are Comparing Two Annuities with Equal Present Values

question 48

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You are comparing two annuities with equal present values.The applicable discount rate is 6.65 percent,compounded annually.One annuity pays $4,500 on the first day of each year for 25 years.How much does the second annuity pay each year for 25 years if it pays at the end of each year?


Definitions:

Factor's Price

The price paid for the use of a factor of production, such as labor, land, or capital.

Final Product

A good or service that has completed the production process and is available for sale to the end consumer.

Technology

The application of scientific knowledge for practical purposes, especially in industry.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor of production, such as labor or capital.

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