Question

Which of the following statements about annuities are true? Check all that apply. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. 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 due earns more interest than an ordinary annuity of equal time. Which of the following is an example of an annuity? O A fund that invests in technology companies and distributes quarterly dividends for two out of four quarters per year but not always the same quarters O A retirement fund set up to pay a series of regular payments 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 $1,130 in her local bank, which pays her 7% annual interest. Luana decides that she will continue to do this for the next three years. Luana's savings are an example of an annuity. How much will she save by the end of three years? O $3,887.14 O $3,632.84 O $3,087.91 O $2,965.48 If Luana deposits the money at the beginning of every year and everything else remains the same, she will save by the end of three years. $4,858.93 $3,173.06 $3,632.84 $3,887.14

Answer 1

An annuity is basically equal periodic payments for certain period of time. 1 Hence, an annuity is series of equal payments made at fixed intervals for specified period of time. 2 Hence, retirement fund is an example of annuity as it has series of equal regular payments 3 Payments, P -$1,130.00 Annual Interest, I 7.00% Present Value 0 Time, N 3 years Future Value, FV P * ([1 + JAN-1)/. FV $3,632.84 Hence the Future value of investment is $3632.84 4 Payments At the begining Payments, P $1,130.00 Annual Interest, I 7.00% Time, N. 3 years Future Value, FV (P *[((1+r)n - 1) / r])*(1 + r) $3,887.14 FV