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ou are comparing two annuities. Annity ay $100 at the end of each month for 5 rs. Annuit B pays $100 at the beginning each month for 5 years. The rate of urn on both annuities is 6 percent. Whic

ou are comparing two annuities. Annity ay $100 at the end of each month for 5 rs. Annuit B pays $100 at the beginning each month for 5 years. The rate of urn on both annuities is 6 percent. Whic

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....
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2. You are comparing two annuities. Annity A pay $100 at the end of each month for 5 years. Annuit B pays $100 at the beginning of each month for 5 years. The rate of return on both annuities is 6 percent. Which one of the following statements is correct given this information? Explanation Annuity A has a higher future value than Annuity B, but a lower present value than Annuity B. Annuity B has a higher future value than Annuity A, but a lower present value than Annuity A. Annuity B has both a higher present value and a higher future value than Annuity A.
Transcribed Image Text:2. You are comparing two annuities. Annity A pay $100 at the end of each month for 5 years. Annuit B pays $100 at the beginning of each month for 5 years. The rate of return on both annuities is 6 percent. Which one of the following statements is correct given this information? Explanation Annuity A has a higher future value than Annuity B, but a lower present value than Annuity B. Annuity B has a higher future value than Annuity A, but a lower present value than Annuity A. Annuity B has both a higher present value and a higher future value than Annuity A.
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