Miss Nadia has to choose the better of two equally costly cash flow streams, annuity A and annuity B. Annuity A is an annuity due with a cash inflow of Rs 9,000 for each of 6 years. Annuity B is an ordinary annuity with a cash inflow of Rs. 10,000 for each of 6 years. Assume that Nadia can earn 15 percent on her investments.

Required.

a. Find the future value at the end of year 6, FVA6, for both annuities.

b. Use your findings in part a indicate which annuity is more attractive. Why?

Answer rating: 100% (QA)

Given Data Annuity A Annuity B Cash inflow Rs9000 Cash inflow Rs10000 Time p... View the full answer