You Have the Choice of Two Equally Risk Annuities,each Paying

question 17

Multiple Choice

You have the choice of two equally risk annuities,each paying $5,000 per year for 8 years.One is an annuity due and the other is an ordinary annuity.If you are going to be receiving the annuity payments,which annuity would you choose to maximize your wealth?

• A) The annuity due
• B) The ordinary annuity
• C) Since we don't know the interest rate, we can't find the value of the annuities and hence we cannot tell which one is better.
• D) Either one because they have the same present value.

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Definitions:

Reward System

A framework within an organization designed to recognize and reward employee performance and contribute to motivation and satisfaction.

Maximum Efficiency

The optimal use of resources to achieve the highest possible output or productivity with the least amount of input or waste.

Production Process

The sequence of operations or procedures used to convert raw materials into finished goods or services.

Flexibility

The ability of an individual or organization to adapt to changes, challenges, or new circumstances efficiently and effectively.