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Suppose that you have a choice to receive one of the two annuities:

a. 18 payments of $5,000 at the end of each 6 months.

b. 18 payments of $5,000 at the beginning of each 6 months. Interest rate is 4% per year. Which choice would you prefer?

choice b since it produces a higher PV

choice a because it gives you a higher FV

choice a because it produces a higher return

both choices are valued the same since the interest rate is the same.

Suppose you borrowed $30,000 at a rate of 8% and must repaay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92696103

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