You Are Comparing Two Investment Options That Each Pay 5

question 108

Multiple Choice

You are comparing two investment options that each pay 5 percent interest,compounded annually.Both options will provide you with $12,000 of income.Option A pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each.Option B pays three annual payments of $4,000 each.Which one of the following statements is correct given these two investment options?

• A) Both options are of equal value given that they both provide $12,000 of income.
• B) Option A has the higher future value at the end of year three.
• C) Option B has a higher present value at time zero than does option A.
• D) Option B is a perpetuity.
• E) Option A is an annuity.

---

Definitions:

Psychoanalytic Psychotherapy

A form of therapy that emphasizes the exploration of unconscious motivations and conflicts, based on Freudian theories.

Humanistic Therapies

A group of psychotherapies that emphasize personal growth and the concept of self-actualization.

Neuroleptics

A class of medications used to treat psychiatric disorders that affect a person's thinking, mood, or behavior, often by altering neurotransmitter levels in the brain.

Psychological Disorders

A wide range of mental health conditions that affect mood, thinking, and behavior, significantly impacting daily living and possibly requiring clinical intervention.