ou have the choice of two equally risky annuities, each paying $5,000 per year for 8 years. One is an annuity that pays at the beginning of the year and the other is an annuity that pays at the end of the year. If you are going to be receiving the annuity payments, which annuity would you choose to maximize your wealth?   A. Since we don't know the interest rate, we can't find the value of the annuities and hence we cannot tell which one is better.   B. either one because they have the same present value   C. the annuity that pays at the beginning of the year   D. the annuity that pays at the end of the year

Assume that you own an annuity that will pay you $14,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $125,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment?   a. 11.20%     b. 4.46%     c. 4.87%     d. 20.01%     e. 5.90%

(Related to Checkpoint 5.6) (Solving for) You are considering investing in a security that will pay you $4,000 in 31 years. a. If the appropriate discount rate is 10 percent, what is the present value of this investment? b. Assume these investments sell for $2,062 in return for which you receive $4,000 in 31 years. What is the rate of return investors earn on this investment if they buy it for $2,062? C a. If the appropriate discount rate is 10 percent, the present value of this investment is $. (Round to the nearest cent.)

You just won a lottery that promises to pay you $1 million exactly 10 years from today. Because the $1 million payment is guaranteed by the state in which you live, opportunities exist to sell the claim today for an immediate lump-sum cash payment. What is the least you will sell your claim for if you could earn 5.05 % on similar-risk investments during the 10-year period?

6. You are contemplating the purchase of a twenty-four year (variable) annuity that promises cash flows in the following pattern, repeating every four years: 1e 2e 3e 4e 21e 24 22 23 $1,600- $1,500- $1,400 $1,300- $1,600 $1,500 $1,400 $1,300 Suppose you don't like the fluctuations in the amount of your annual benefits.e a. What annual rate of return would you use to convert these (end-of-year) cash flows to equal annual (end-of-year) amounts if you required an APR of 14.4%, compounded monthly?e b. Without prejudice to your answer in part a, suppose that your required annual rate of return is 15%, what equal annual (beginning-of-year) payments over the twenty-four year period would be equivalent to the cash flow stream depicted above?

Suppose you bought a condo for $100,000 financing it with a $20,000 down payment of your own funds and an $80,000 mortgage loan from a bank. Assume that the market value of your condo has now risen to $120,000.  Ignoring interest and other costs, and assuming the loan amount is still $80,000, calculate your rate of return on your asset (ROA) and your rate of return on equity (ROE).