Suppose someone offered you your choice of two equally risky annuities, each paying $10,000 per year for four years. One is a regular (or deferred) annuity, while the other is an annuity due. If you are a rational wealth maximizing investor which annuity would you choose? a. The annuity due; however, if the payments on both were increased by at least 50 percent to $15,000, the deferred annuity would be preferred.
b. The deferred annuity.
c. Either one if the discount rate is positive, because as the problem is set up, they have the same present value.
d. The annuity due.
e. Without information about the appropriate interest rate, we cannot find the values of the two annuities, hence we cannot tell which is better.