Suppose that you have a choice to receive one of the two annuities:
a. 18 payments of $5,000 at the end of each 6 months.
b. 18 payments of $5,000 at the beginning of each 6 months. Interest rate is 4% per year. Which choice would you prefer?
choice b since it produces a higher PV
choice a because it gives you a higher FV
choice a because it produces a higher return
both choices are valued the same since the interest rate is the same.
Suppose you borrowed $30,000 at a rate of 8% and must repaay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be?