Question

Two annuities have equal present value. What can be concluded about the annuities?

1) They have the same future value
2) They have the same interest rate
3) They have the same number of payments
4) They have the same payment amount

Answer 1

Two annuities with equal present value may have the same future value and interest rate, but not necessarily the same number of payments or payment amount.

Step-by-step explanation:

If two annuities have equal present value, several conclusions can be drawn:

1. They have the same future value. Present value represents the current worth of future cash flows, so if the present value is the same, the future value will also be the same.
2. They have the same interest rate. The interest rate affects the calculation of present value, so if two annuities have equal present value, it means they were discounted at the same interest rate.
3. They do not necessarily have the same number of payments. The number of payments can vary while still resulting in equal present value.
4. They do not necessarily have the same payment amount. The payment amount can vary while still resulting in equal present value.