Future values of annuities Ramesh Abdul has the opportunity to invest in either of two annuities, each of which will cost $38,000 today. Annuity X is an annuity due that makes 6 cash payments of $9,000. Annuity Y is an ordinary annuity that makes 6 cash payments of $10,000. Assume that Ramesh can earn 15% on his investments.

a. On a purely intuitive basis (i.e., without doing any math), which annuity do you think is more attractive? Why?

b. Find the future value after 6 years for both annuities.

c. Use your finding in part b to indicate which annuity is more attractive. Why? Compare your finding to your intuitive response in part a.

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