1. An annuity and an annuity due that have the same number of payments also have the same present value if r = 10%. Which one has the higher payment? A. The annuity has the higher payment B. The annuity due has the higher payment C. They both must have the same payment since the present values are the same D. There is no way to tell which has the higher раyment E. An annuity and an annuity due cannot have the same present value 2. Classify each of the following in terms of their effect on interest rates (increase or decrease): I. Perceived risk of financial securities increases II. Near term spending needs decrease II. Future profitability of real investments increases A. Iincreases, II increases, II increases B. Iincreases, Il decreases, III decreases C. I decreases, II increases, III increases D. I decreases, II decreases, III decreases E. None of the above

1. An annuity and an annuity due that have the same number of payments also have the same present value if r = 10%. Which one has the higher payment? A. The annuity has the higher payment B. The annuity due has the higher payment C. They both must have the same payment since the present values are the same D. There is no way to tell which has the higher раyment E. An annuity and an annuity due cannot have the same present value 2. Classify each of the following in terms of their effect on interest rates (increase or decrease): I. Perceived risk of financial securities increases II. Near term spending needs decrease II. Future profitability of real investments increases A. Iincreases, II increases, II increases B. Iincreases, Il decreases, III decreases C. I decreases, II increases, III increases D. I decreases, II decreases, III decreases E. None of the above

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter11: Liabilities: Bonds Payable

Section: Chapter Questions

Problem 11E

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The present value of an annuity due of t payments of $1 per period is the same as Multiple Choice (C) (1 + r) times the present value of an equivalent ordinary annuity. (A) the present value of an ordinary annuity of t payments. (B) $1 plus the present value of an ordinary annuity with t -1 payments. None of the answers are correct. (B) and (C).
The present value of a perpetuity is equal to the payment on the annuity, PMT, divided bythe interest rate, I : PV = PMT/I. What is the future value of a perpetuity of PMT dollars peryear? (Hint: The answer is infinity, but explain why.)
If annuity A has 30 payments of $500 at an interest rate of 10% and annuity B has 30 payments of $500 at an interest rate of 9%, which one has the higher present value? Select one: a. Not enough information to determine. b. B c. A
1. Which statement is FALSE? A. Future value annuity is an example of annuity. B. A perpetuity is an annuity that has maturity period. C. An annuity is a series of equal payment made for a specified number of years. D. Ordinary annuity is an annuity in which the cash flows occur at the end of each period.
Annuity A and B are exactly the same except that annuity A has an interest rate of 4% and annuity B has an interest rate of 5%, which one has the higher future value? Select one: a. B b. A=B c. A
Annuity A and B are exactly the same except that annuity A has 5 payments and annuity B has 7 payments, which one has the higher future value? Select one: a. B b. A=B c. A
With a zero interest rate both the present value and the future value of an N payment annuity would equal N x payment true or false?
An annuity, and an annuity due, with the same number of payments have the same future value if r = 10%. Which one has the higher payment?
Which of the following is false? The future value of a deferred annuity is equal to the future value of an annuity not deferred. If the first payment is received at the end of the fifth period, it means the ordinary annuity is deferred for five periods. The present value of a deferred annuity is less than the present value of an annuity not deferred. To calculate the present value of a deferred annuity, determine the present value of an ordinary annuity for the entire period and subtract the present value of the payments which were not received during the deferral period.
Not too long ago, interest rates were essentially zero. If interest rates fall to 1/100th of a basis point (r = 0.000001), which of the following is true (if we round to the nearest dollar)? Select all that are true. A) the present value of the annuity will equal the sum of the annuity cash flows B) the future value of the annuity will equal the sum of the annuity cash flows C) the present value of the annuity will equal the future value of the annuity D) annuity values cannot be solved at a rate of 0.0001%
Which of the following statements is CORRECT? 1. If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity. 2. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month. 3. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity. 4. The cash flows for an annuity due must all occur at the ends of the periods. 5. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
we compare the same regular monthly deposits made into an annuity due with an ordinary annuity with the same positive interest rate, and over the same period of time, the ordinary annuity will havE____lower prices