You are comparing two investment options that each pay 5 percent interest, compo

Question

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?
Question 2 options:
1) Option B has a higher present value at time zero than does option A.
2) Option A is an annuity.
3) Both options are of equal value given that they both provide $12,000 of income.
4) Option A has the higher future value at the end of year three.
5) Option B is a perpetuity.

Explanation / Answer

C. Option B has a higher present value at time zero than does option A.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.