Question 22 (5 points) All else being equal that is, identical present value, identical number of periods and identical interest rate), the periodic payment of an ordinary annuity will be higher than the payment of an annuity due. True False Page 17 of 20 Previous Page Next Page Question 20 (5 points) You have been sued. If you lose the case, you will have to pay $10,000 three years from now. If you win the case, you will not pay anything. You estimate the likelihood that you will lose the case to be 70%. The risk-free rate is 5%. An advisor suggests adding to the risk-free rate a risk premium equal to 4%, to reflect the fact that you are not certain about whether you will have to pay $10,000 or not. If you use the Expected Cash Flow Approach, which of the following is the right formula to calculate the present value? PV = $10,000 x PVF (3.5%) PV = $7.000 x PVF (3.5%) PV = $7.000 x PVF (3.9%) PV = $10,000 x PVF (3.9%) PV = $7.000 x PVF (3.4%)