Alpha Geek

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    Polytechnic State University Sanluis
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Category > Accounting Posted 23 Jun 2017 My Price 3.00

You are comparing two investment options that each pay 5% interest, compounded annually

You are comparing two investment options that each pay 5% interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays 3 annual payments with $2,000 the first year followed by 2 annual payments of $5,000 each. Option B pays 3 annual payments of $4,000 each. Which one of the following statement is correct, given these two investment options?

Answer

  A.

Both options are of equal value given that they both provide $12,000 of income.
  B.

Option A has the higher future value at the end of year three.
  C.

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

Option B is a perpetuity.

Answers

Alpha Geek
(8)
Status NEW Posted 23 Jun 2017 07:06 AM My Price 3.00

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Attachments

file 1498204224-474304_1_636337030137092868_Opt.xlsx preview (22 words )
Ye-----------arO-----------pti-----------on -----------1Op-----------tio-----------n 2-----------Dis-----------cou-----------nt -----------rat-----------ePV-----------(Op-----------tio-----------1)P-----------V(O-----------pti-----------o2)-----------Tot-----------al -----------PVA-----------nsw-----------er -----------C. ----------- Is----------- co-----------rre-----------ctO-----------pti-----------on -----------B h-----------as -----------a h-----------igh-----------er -----------pre-----------sen-----------t v-----------alu-----------e a-----------t t-----------ime----------- ze-----------ro -----------tha-----------n d-----------oes----------- Op-----------tio-----------n A-----------. -----------
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