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Suppose you get for free one of following two securities: (a) an annuity that pays...

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Finance

Suppose you get for free one of following two securities: (a) an annuity that pays $10,000 at the end of each of the next 6 years; or (b) a perpetuity that pays $10,000 forever, but it does not begin until 10 years from now (i.e., the first cash payment from this perpetuity is 11 years from now).

Which security would you choose if the annual interest rate is 5%? Does your answer change if the interest rate is 10%? Explain why or why not.

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