The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities have the same positive interest rate.
a. An annuity that pays $1,000 at the end of each year
b. An annuity that pays $500 at the end of every six months
c. An annuity that pays $1,000 at the beginning of each year
d. An annuity that pays $500 at the beginning of every six months
An ordinary annuity selling at $7,715. 86 today promises to make equal payments at the end of each year for the next three years (N). If the annuity's appropriate interest rate (I) remains at 5. 00% during this time, what will be the value of the annual annuity payment (PMT)?
a. $4,108. 33
b. 2673.54
c. 3541.66
d. 2833.33