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:

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price over a specific time period.

Tariff

is a tax imposed by a government on goods and services imported from other countries to protect domestic industries from foreign competition.

Domestic Price

The price of goods or services within a country, influenced by local demand and supply conditions, taxes, and other internal factors.

Carnations

A type of flower known for its distinct, clove-like scent and its popularity as a gift or decorative plant.