Reference no: EM131300179
You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT?
a. If the going rate of interest decreases from 10% to 0%, the difference between the present value of ORD and the present value of DUE would remain constant.
b. The present value of DUE exceeds the present value of ORD, and the future value of DUE also exceeds the future value of ORD.
c. The present value of DUE exceeds the present value of ORD, while the future value of DUE is less than the future value of ORD.
d. The present value of ORD exceeds the present value of DUE, and the future value of ORD also exceeds the future value of DUE.
e. The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value of DUE.
|
Accounting rules when presenting their financial statements
: Even though firms follow the accounting rules (GAAP) when presenting their financial statements, it is still possible for conflicts of interest to exist between what management wants investors and creditors to see and the economic reality of transact..
|
|
Calculate the expected return and the volatility
: Suppose Johnson? & Johnson and the Walgreen Company have the expected returns and volatilities shown? below, with a correlation of 21.7%. calculate: The expected return. The volatility? (standard deviation). The expected return. The expected return o..
|
|
Portfolio is expected to pay its first dividend
: A stock that Melvin has just added to his portfolio is expected to pay its first dividend of $2.20 two years from now. The next year, the dividend will increase to $2.40, and at the end of the 4th year, the dividend will increase to $2.70. After the ..
|
|
What rate of return will stein need to achieve this goal
: Dr. Stein has just invested $ 100.000 for his son. The money will be used for his son's education 10 years from now. He calculates that he will need $215, 980 for his son's education by the time his son goes to school. What rate of return will Dr. st..
|
|
Considering two equally risky annuities
: You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. If the going rate of interest decreases from 10% to 0%, the..
|
|
Identify a national commercial bank
: Identify a national commercial bank (not the holding company) – one with total assets exceeding $10 billion. Ensure it is a commercial bank (not a savings bank, not a credit card company), or your assignment will not be considered. Note also, we are ..
|
|
Expected return on equally weighted portfolio of three stock
: Consider the following information: What is the expected return on an equally weighted portfolio of these three stocks? What is the variance of a portfolio invested 16 percent each in A and B and 68 percent in C?
|
|
Cost of goods sold equals gross profit
: Only service companies report both cost of goods sold and gross profit. Cost of goods sold is the largest expense item for many firms. Cost of goods sold is not affected by the choice of inventory valuation method. Cost of goods sold equals gross pro..
|
|
Effective annual return of eight percent on this investment
: Peter Lynchpin wants to sell you an investment contract that pays equal $12,100 amounts at the end of each year for the next 21 years. If you require an effective annual return of 8 percent on this investment, how much will you pay for the contract t..
|