You are comparing two annuities. Annuity A pays $100 at the end of each month fo

Question

You are comparing two annuities. Annuity A pays $100 at the end of each month for 10 years. Annuity B pays $100 at the beginning of each month for 10 years. The rate of return on both annuities is 8 percent. Which one of the following statements is correct given this information?

Annuity A has a higher future value but a lower present value than Annuity B.

(I'm debating between c or d, need a 2nd opinion)

The present value of Annuity A is equal to the present value of Annuity B. Annuity B will pay one more payment than Annuity A will. The future value of Annuity A is greater than the future value of Annuity B. Annuity B has both a higher present value and a higher future value than Annuity A.

Annuity A has a higher future value but a lower present value than Annuity B.

(I'm debating between c or d, need a 2nd opinion)

Explanation / Answer

Present Value Future Value Ending Annuity ($8,242.15) ($18,294.60) PV(8%/12,120,100) FV(8%/12,120,100,,0) Beginning Annuity ($8,297.10) ($18,416.57) PV(8%/12,120,100,,1) FV(8%/12,120,100,,1) By seeing above table, it can be concluded option D is correct

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