7. Future value of annuities There are two categories of cash flows: single cash flows, referred to as “lump sums,” and annuities. Based on your understanding of annuities, answer the following questions. A. Which of the following statements about annuities are true? Check all that apply. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. An annuity due earns more interest than an ordinary annuity of equal time. B. Which of the following is an example of an annuity? A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time An investment in a certificate of deposit (CD) C. Luana loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $710 in her local bank, which pays her 4% annual interest. Luana decides that she will continue to do this for the next five years. Luana’s savings are an example of an annuity. How much will she save by the end of five years? $3,999.41 $3,268.75 $3,845.59 $3,160.79 D. If Luana deposits the money at the beginning of every year and everything else remains the same, she will save by the end of five years.
7. Future value of annuities There are two categories of cash flows: single cash flows, referred to as “lump sums,” and annuities. Based on your understanding of annuities, answer the following questions. A. Which of the following statements about annuities are true? Check all that apply. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. An annuity due earns more interest than an ordinary annuity of equal time. B. Which of the following is an example of an annuity? A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time An investment in a certificate of deposit (CD) C. Luana loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $710 in her local bank, which pays her 4% annual interest. Luana decides that she will continue to do this for the next five years. Luana’s savings are an example of an annuity. How much will she save by the end of five years? $3,999.41 $3,268.75 $3,845.59 $3,160.79 D. If Luana deposits the money at the beginning of every year and everything else remains the same, she will save by the end of five years.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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7. Future value of annuities
There are two categories of cash flows: single cash flows, referred to as “lump sums,” and annuities. Based on your understanding of annuities, answer the following questions.
A. Which of the following statements about annuities are true? Check all that apply.
An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period.
Ordinary annuities make fixed payments at the beginning of each period for a certain time period.
An annuity is a series of equal payments made at fixed intervals for a specified number of periods.
An annuity due earns more interest than an ordinary annuity of equal time.
B. Which of the following is an example of an annuity?
A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time
An investment in a certificate of deposit (CD)
C. Luana loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $710 in her local bank, which pays her 4% annual interest. Luana decides that she will continue to do this for the next five years. Luana’s savings are an example of an annuity. How much will she save by the end of five years?
$3,999.41
$3,268.75
$3,845.59
$3,160.79
D. If Luana deposits the money at the beginning of every year and everything else remains the same, she will save by the end of five years.
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