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