Question

1)

A 10-year, $600 annuity pays its first payment at Date 3. If you compute the present value of this annuity, the computed value will be as of Date:

• 1

• 3

• 2

• 4

2)

Debt securities

• represent a minority ownership interest in the issuer.

• pay tax-deductible dividends.

• increase a firm’s cost of doing business.

• are treated the same as equity securities in a bankruptcy proceeding.

• are considered a liability only at the time payment is actually due.

Answer 1

1) PV computed using the annuity formula will be at the date one period before the first payment. So, the correct answer is Date 2

2) Debt securities

• are considered a liability only at the time payment is actually due.

All other answer options are incorrect

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