Author Question: Which of the following is NOT true regarding the total payment in an equal payment amortization ... (Read 161 times)

EAugust

  • Hero Member
  • *****
  • Posts: 550
Which of the following is NOT true regarding the total payment in an equal payment amortization table?
 
  A) The total payment for any period is equal to the principal plus interest payments for that same period.
  B) The total payment is calculated using the present value of an annuity formula rearranged to solve for the payment.
  C) The final total payment will be greater than the beginning principal for the final period, assuming a positive interest rate.
  D) All of the above are true.

Question 2

Suppose someone offered you your choice of two equally risky annuities, each paying 5,000 per year for 5 years. One is an annuity due, while the other is a regular (or deferred) annuity.
 
  If you are a rational wealth maximizing investor, which annuity would you choose?
  A) The annuity due
  B) The deferred annuity
  C) Either one, because as the problem is set up, they have the same present value.
  D) Without information about the appropriate interest rate, we cannot find the value of the two annuities, hence we cannot tell which is better.
  E) The annuity due; however, if the payments on both were doubled to 10,000, the deferred annuity would be preferred.


gcook

  • Sr. Member
  • ****
  • Posts: 343
Answer to Question 1

Answer: D

Answer to Question 2

A



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

The cure for trichomoniasis is easy as long as the patient does not drink alcoholic beverages for 24 hours. Just a single dose of medication is needed to rid the body of the disease. However, without proper precautions, an individual may contract the disease repeatedly. In fact, most people develop trichomoniasis again within three months of their last treatment.

Did you know?

Vaccines prevent between 2.5 and 4 million deaths every year.

Did you know?

Only one in 10 cancer deaths is caused by the primary tumor. The vast majority of cancer mortality is caused by cells breaking away from the main tumor and metastasizing to other parts of the body, such as the brain, bones, or liver.

Did you know?

In 1885, the Lloyd Manufacturing Company of Albany, New York, promoted and sold "Cocaine Toothache Drops" at 15 cents per bottle! In 1914, the Harrison Narcotic Act brought the sale and distribution of this drug under federal control.

Did you know?

Chronic necrotizing aspergillosis has a slowly progressive process that, unlike invasive aspergillosis, does not spread to other organ systems or the blood vessels. It most often affects middle-aged and elderly individuals, spreading to surrounding tissue in the lungs. The disease often does not respond to conventionally successful treatments, and requires individualized therapies in order to keep it from becoming life-threatening.

For a complete list of videos, visit our video library