Question

What is an annuity?

Select one:

a. present worth of a series of equal payments.

b. a single payment.

c. a series of payments that changes by a constant amount from one period to the next.

d.
a series of equal payments over a sequence of equal periods.

e. a series of payments that changes by the same proportion from one period to the next.

Question 2

The present worth factor

Select one:

a. gives the future value equivalent to a series of equal payments.

b. gives the present amount that is equivalent to some future amount.

c. converts a series of repeated equal payments into the equivalent future amount.

d. gives the future amount that is equivalent to a present amount.

e.
converts an annuity into the equivalent present amount.

Question 3

Five years ago John invested $10 000 at 5% nominal interest rate compounded daily. What is his investment worth today?

Select one:

a. $11 763

b. $12 763

c. $13 763

d. $12 840

e. $10 513

Question 4

How much money will you accumulate in a bank account by the end of a 5-year period if you deposit $1 200 today at an interest rate of 2% per year, compounded quarterly?

Select one:

a. $1 514

b. $1 849

c. $1 783

d. $1 326

e. $1 230

Question 5

The compound amount factor produces

Select one:

a. the annuity, A, that is equivalent to a present amount, P.

b. the present amount, P, that is equivalent to a future amount, F.

c. the future amount, F, that is equivalent to a present amount, P.

d. the annuity, A, that is equivalent to a future amount, F.

e. the future amount of arithmetic gradient series.

Question 6

If Emily deposits $500 every other year into her bank account that pays 1.5% annual interest, compounded yearly, how much will she accumulate over a 10-year period?

Select one:

a. $2 500

b. $5 738

c. $2 576

d. $2 656

e. $2 568

Question 7

The present worth of an infinitely long uniform series of cash flows is called

Select one:

a. salvage value.

b. compound value.

c. continuous value.

d. capitalized value.

e. sinking value.

Question 8

Suppose that you want to evaluate the following non-standard cash flow: $1 000 paid at the end of every third year in a 12-year period with annual interest rate of 10%. What is the best method?

Select one:

a. Convert the non-standard cash flow into standard annuity by changing the interest rate.

b. Convert the non-standard cash flow into arithmetic gradient series.

c. Convert the non-standard cash flow into a geometric gradient series.

d. Convert the non-standard cash flow into standard annuity by changing the compounding period.

e. Treat each payment as a separate payment.

Question 9

Calculate the uniform annuity equivalent to an arithmetic gradient series with a basic payment of $500 per year for 10 years that increases by $50 per year beginning in year 2, under 10% annual interest rate?

Select one:

a. $686

b. $550

c. $936

d. $500

e. $1 186

Question 10

How many years will it take for an investment to triple itself if the interest rate is 12% compounded annually

Select one:

a. 9.10

b. 8.80

c. 9.40

d. 10.0

e. 9.70

Question 11

The present worth of an infinitely long uniform series of cash flows is equal to

Select one:

a. A/i

b. A/(i + 1)

c. A*i

d. A * [1/i - N/((1 + i)N - 1)]

e. A*[(1 + i)N - 1]

Question 12

How much Jim can accumulate in a private pension fund over 20 years if the fund offers 5% interest compounded annually, and he can afford to deposit $2 000 at the end of every second year?

Select one:

a. $94 256

b. $32 259

c. $28 946

d. $117 853

e. $66 132

Question 13

How much should be set aside each month to accumulate $10 000 at the end of year 3 under 12% annual interest rate compounded monthly?

Select one:

a. $232.14

b. $252.14

c. $277.78

d. $242.14

e. $222.14

Question 14

A person deposits $100 to his savings account biweekly. The savings account pays a nominal interest rate of 5% per year, compounded every six months. What is the effective interest rate for a 6-month period?

Select one:

a. 5.1%

b. 3.2%

c. 2.5%

d. 2.1%

e. 4.2%

Question 15

Suppose that you have a series of payments: $100 in year 1, $150 in year 2 and $200 in year 3. If annual interest rate is 10%, what is the equivalent annuity for this series?

Select one:

a. $140.11

b. $150.00

c. $146.82

d. $142.33

e. $135.68

Question 16

You will need to buy a replacement computer, costing $3 000, in five years time. If you have a bank account which earns 8% annual interest, how much must you put in the bank every year in order to have enough money for the replacement, assuming you make your first deposit in a year's time?

Select one:

a. $712

b. $675

c. $565

d. $597

e. $666

Question 17

You want to have a million dollars in the bank when you retire. You think you can save $5 000 a year in a bank that offers you 5% interest. If you make your first deposit in a year's time, how many years will it be from now before you can retire?

Select one:

a. 50

b. 70

c. 40

d. 30

e. 60

Question 18

You want to have a million dollars in the bank when you retire. You think you can save $5 000 this year, and increase that by $100 every subsequent year, in a bank that offers you 5% interest. If you make your first deposit in a year's time, how many years will it be from now before you can retire?

Select one:

a. 35

b. 40

c. 45

d. 30

e. 50

Question 19

Every leap year you get a bonus of $20 000, which you put into a retirement account at 5% interest. If your first payment into the account is made in four years’ time, and you put no other money into the account, how long will it be before you can retire with a million dollars?

Select one:

a. 48

b. 44

c. 40

d. 36

e. 52

Question 20

You are offered a series of monthly payments of $10, continuing forever. If you deposit these at a nominal interest rate of 12%, compounded monthly, what is the present worth of the series?

Select one:

a. $1000

b. $1500

c. Infinite

d. $1200

e. $120

Question 21

An arithmetic gradient series

Select one:

a. starts at zero at the beginning of the second period and then increases by a constant amount each period.

b. starts at zero at the end of the first period and then increases by an increasing amount each period.

c. starts at zero at the beginning of the first period and then increases by a constant amount each period.

d. starts at zero at the end of the second period and then increases by a constant amount each period.

e. starts at zero at the end of the first period and then increases by a constant amount each period.

Question 22

Natalie received a gift of $1 000 from her grandmother. She decides to invest the money into a trip she wants to take when she graduates from college three years from now. What annual rate of return does she have to have to accumulate $1 250 by the time of her graduation?

Select one:

a. 8.4%

b. 9.2%

c. 7.7%

d. 12.5%

e. 7.9%

Question 23

One standard assumption for annuities and gradients is

Select one:

a. each payment occurs at the beginning of the period.

b. annuities and gradients coincide with the beginning of sequential periods.

c. payment period and compounding period are the same.

d.
payment period and compounding period differ.

e. annuities and gradients coincide with the end of preceding periods.

Question 24

A geometric gradient series

Select one:

a. starts with zero and from period to period increases by a constant amount.

b. starts with a certain amount and from period to period increases by a constant rate.

c. starts with zero and from period to period increases by a constant rate.

d. starts with a certain amount and from period to period increases by a constant amount.

e. starts with a certain amount and from period to period decreases by a constant percentage.

Question 25

A factor that relates a single cash flow in one period to another single cash flow in a later period is

Select one:

a. the uniform series compound amount factor.

b. the sinking fund factor.

c. the compound amount factor.

d. the annuity conversion factor.

e. the capital recovery factor.

Question 26

The capital recovery factor converts

Select one:

a. A into P.

b. P into A.

c. P into F.

d. A into F.

e. F into A.

Question 27

An annuity due is:

Select one:

a. a series that starts at the end of the first period and remains constant thereafter.

b. a series that starts at the end of the first period and increases by constant percentage thereafter.

c. a series that starts at the end of the first period and increases by constant amount thereafter.

d. a series that starts now and remains constant thereafter.

e. a series that starts now and increases by constant amount thereafter.

Question 28

Maria wants to save up for a car. How much should she put in her bank account monthly to save $10 000 in two years if the bank pays 6% interest compounded monthly?

Select one:

a. $416.67

b. $316.67

c. $293.21

d. $401.13

e. $393.20

Question 29

You want to have a million dollars in the bank when you retire. You think you can save $5 000 this year, and increase that by 2% every subsequent year, in a bank that offers you 5% interest. If you make your first deposit in a year's time, how many years will it be from now before you can retire?

Select one:

a. 41

b. 45

c. 43

d. 44

e. 42

Question 30

You are promised that when you retire from your current job, in 40 years' time, you will receive a gold watch valued at $1 000. If you can invest money at 5% annual interest, what is the present worth of this promise?

Select one:

a. $231

b. $167

c. $211

d. $142

e. $156

Answer 1

1) What is annuity?

a series of equal payments over a sequence of equal periods.

• Most like the period used to be around 1 year.
• Hence the name annuity.
• There will be equal payments in the equal period.
• The equal period is known as periodic rent.

As HOMEWORKLIB RULES we can answer only 1 question

Please comment for any doubts

Thanks