Business, 07.03.2020 03:30 sksksksksk1
You are comparing two investment options. The cost to invest in either option is the same today. Both options will provide you with $20,000 of income. Option A pays five annual payments starting with $8,000 the first year followed by four annual payments of $3,000 each. Option B pays five annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?
a. Option A is preferable because it is an annuity due.
b. Both options are of equal value given that they both provide $20,000 of income.
c. Option A is the better choice of the two given any positive rate of return.
d. Option B has a lower future value at year 5 than option A given a zero rate of return.
e. Option B has a higher present value than option A given a positive rate of return.
Answers: 3
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