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Author Question: Which is greater, the present value of a 1,000 five-year ordinary annuity discounted at 10, or the ... (Read 64 times)

ss2343

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on: Jul 10, 2018
Which is greater, the present value of a 1,000 five-year ordinary annuity discounted at 10, or the present value of a 1,000 five-year annuity due discounted at 10?
 
  A) The ordinary annuity is worth more with a present value of 3,790.79.
  B) The annuity due is worth more with a present value of 4,169.87.
  C) The ordinary annuity is worth more with a present value of 4,169.87.
  D) The annuity due is worth more with a present value of 4,586.85.

Question 2

Which of the following dividend policies will cause dividends per share to fluctuate the most?
 
  A) constant dividend payout ratio
  B) small, low, regular dividend plus a year-end extra
  C) stable dollar dividend
  D) no difference between the various dividend policies
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
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Jsherida

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: B
Explanation: B)
PV = PMT  = 1,000  = 3,790.79.
MODE = END
INPUT 5 10 ? -1,000 0
KEY N I/Y PV PMT FV
CPT 3,790.79
The PV of the annuity due is worth 3,790.79  (1.10) = 4,169.87.

Answer to Question 2

A


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