Which of the following alternatives signify the difference between the present value of a $150 perpetuity and 2-year $150 annuity, both discounted at 15 percent per annum
a. The perpetuity would require an initial investment worth $100 while the annuity would require an initial investment worth $244.07.
b. The perpetuity would require an initial investment worth $1,500 while the annuity would require an initial investment worth $115.07.
c. The perpetuity would require an initial investment worth $1,000 while the annuity would require an initial investment worth $244.07.
d. The perpetuity would require an initial investment worth $100 while the annuity would require an initial investment worth $115.07.
C
You might also like to view...
Why might Congress benefit from the Fed being self-financed?
A) Self-financing increases Congressional control over the Fed. B) Self-financing reduces the Fed's exposure to external pressures. C) Self-financing gives the Fed an incentive to expand the money supply, which ultimately results in Congress having additional funds to spend. D) Congress does not benefit from the Fed being self-financed; Congress is obliged by the Constitution to allow the Fed to be self-financed.
You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient?
A. No, the person paid you $20 for the book so his net benefit was only $5, whereas your net benefit was $10. For this change to be Pareto efficient, each of you should have the same net benefit. B. Yes, because even though you gain from the trade and he loses, there is the potential for you to compensate him for his loss. C. No, because you did not receive the maximum amount the other person would have been willing to pay for the textbook. D. Yes, because both of you are better off as a result of the trade.