You Are Comparing Two Annuities with Equal Present Values

question 80

Multiple Choice

You are comparing two annuities with equal present values. The applicable discount rate is 7.5%. One annuity pays $5,000 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) $4,651
• B) $5,075
• C) $5,000
• D) $5,375
• E) $5,405

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Definitions:

Money Supply

The entirety of cash, coins, and checking and savings account balances that make up the financial assets in an economy at a specific point in time.

Inflation

The rate at which the comprehensive cost levels of goods and services rise, diminishing the effectiveness of financial power.

Unemployment

The condition where people who are able and willing to work cannot secure jobs despite actively looking for one.

Economists

Specialists in understanding how products and services are made, allocated, and consumed, while investigating economic trends and challenges.