Find future value at the end of year six for annuity x and y

Reference no: EM13898008

Future values of annuities Ramesh Abdul wishes to choose the better of two equally costly cash flow streams: annuity X and annuity Y. X is an annuity due with a cash inflow of $9,000 for each of 6 years. Y is an ordinary annuity with a cash inflow of $10,000 for each of 6 years. Assume that Ramesh can earn 15% on his investments.

a. On a purely subjective basis, which annuity do you think is more attractive? Why?

b. Find the future value at the end of year 6, FVA6, for both annuity X and annuity Y.

c. Use your finding in part b to indicate which annuity is more attractive. Why? Compare your finding to your subjective response in part a.

Reference no: EM13898008

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