FIN 370 Course Great Wisdom / tutorialrank.com FIN 370 Course Great Wisdom / tutorialrank.com | Page 34
You are comparing two investment options that each pay 6 percent interest compounded annually. Both options will provide you with $ 12000 of income. Option A pays $ 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? Assume a positive discount rate.
Option B is a perpetuity.
Option B has a higher present value at time zero.
Both options are of equal value since they both provide $ 12,000 of income.
Option A has the higher future value at the end of year three.
Option A is an annuity.
The condition stating that the interest rate differential between two countries is equal to the percentage difference between
You are comparing two investment options that each pay 6 percent interest compounded annually. Both options will provide you with $ 12000 of income. Option A pays $ 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? Assume a positive discount rate.
Option B is a perpetuity.
Option B has a higher present value at time zero.
Both options are of equal value since they both provide $ 12,000 of income.
Option A has the higher future value at the end of year three.
Option A is an annuity.
The condition stating that the interest rate differential between two countries is equal to the percentage difference between