Direction: Define, draw the cash flow diagram, and write the general formula of the following: ANNUITY 1. Ordinary Annuity a) Sum/Future of Ordinary Annuity b) Present Worth of Ordinary Annuity 2. Annuity Due 3. Deferred Annuity
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- Describe the essential differences between the following cash flow streams: Annuity versus perpetuity Annuity due versus ordinary annuity Illustrate with an example each.There are three categories of cash flows: single cash flows, also referred to as “lump sums,” a stream of unequal cash flows, and annuities. Based on your understanding of annuities, answer the following questions. 1. 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. 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. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. 2. Which of the following is an example of an annuity? A job contract that pays a regular monthly salary for three years A job contract that pays an hourly wage based on the work done on a particular day 3. Eleanor loves shopping for clothes, but considering the state of the economy, she has decided to…A fixed stream of cash flows occurring at the beginning of each period for a fixed period of time is known as: Select one: a. Ordinary annuity b. Constant annuity c. Annuity due d. Financial annuity
- Which of the following method is used for calculating Time value of Money? a. Future Value b. All of the options c. Annuity method d. Present valuePlease answer the following question. In this method, the company compares the amount spent on the investment with the discounted expected future cash inflows. a.Payback b.NRV c.Investment d.IRRDefine effective annual rate (EAR) with examples. Differentiate between annuity cash flows and mixed stream with example
- True or False? Please explain An annuity provides a stream of cash flows for a defined period of time, while an annuity-due provides a stream of cash flows that lasts forever.Consider a series of cash flow for a loan financing depicted by a CFD given in Figure Q2(a). With the appropriate interest rates indicated and referring to the Table of Interest. a) Construct the equation and solve the present worth equivalent. b) Construct the equation and solve the series equivalents for the cash flow series. 10%What are the equivalent present worth, annual worth, and future worth of the cash flow given in the accompanying figure? Assume i = 8% .
- Which of the following characteristics is a necessary feature for pricing a set of cash flows as an ordinary annuity? Group of answer choices The period of time between each cash flow must not vary. More than one of the other options are correct. The cash flows must not be a fixed, regular amount. The cash flows must occur on a yearly basis.Consider the cash flow transactions depicted in the accompanying cash flow diagram, with the changing interest rates specified, and i=10% the value of F is closest toDefine the term reinvestment rate and describe how it differs for any cash flow series between (1) a PW value calculated at the MARR, and (2) the IROR value i*.
