You Are Comparing Two Annuities with Equal Present Values

question 125

Multiple Choice

You are comparing two annuities with equal present values.The applicable discount rate is 7.5 percent.One annuity pays $6,000 on the first day of each year for twenty years.How much does the second annuity pay each year for twenty years if it pays at the end of each year?

• A)$5,651
• B)$6,075
• C)$6,450
• D)$7,375
• E)$7,405

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Definitions:

Managing Costs

The process of planning, monitoring, and controlling the expenses associated with business operations to maximize profitability.

Major Improvements

Significant upgrades or enhancements made to processes, systems, or assets to increase efficiency, performance, or value.

EDI

Electronic Data Interchange, a system that allows the exchange of business documents and data across different companies electronically.

B2C

Business-to-Consumer, a commercial transaction model where businesses sell products or services directly to the end-users or consumers.