Suppose you have a choice of two equally risky annuities each paying $1000 per year for 20 years. One is an annuity due
while the other is an ordinary annuity. Which annuity would you choose? Answer the ordinary annuity the annuity due either one because the annuities have the same present value without information about the appropriate interest rate we cannot tell which annuity is better The rate of interest actually paid or earned also called the annual percentage rate (APR) is the ________ interest rate. Answer effective. nominal. discounted. continuous.If $1000 were invested now at a 12% interest rate compounded annually what would be the value of the investment in two years?
Answer $1254 $1210 $1188 $1160 The interest rate that measures the true interest rate when compounding occurs more frequently than once
a year is called the: Answer annual percentage rate compound rate of interest stated rate of interest effective annual rate An annuity with an infinite life is called a (n) Answer perpetuity. infinity. effective annual rate. continuous annuity.