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Question9 4 pts Rodney has borrowed money from a bank to purchase a tractor. Under the terms of the loan, Rodney is to repay the bank by a series of equal annual sums beginning at the end of each of the next 5 years. Which of the following terms best describes Rodneys series of payments? (A) A deferred annuity (B) An annuity due (C) An annuity (D) A life annuity

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Answer #1

Answer - An annuity

Reason - a series of equal cash flow paid at an equal interval is an annuity. It benefits both payer and receiver of payments. The payer gets an option to pay the amount in installments with a charge of interest and saves him from arranging and paying a lumsum large amount and it gives a benefit to receiver of cashflows in terms of interest that is received along with the cashflow.

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Answer #2

ANSWER : an annuity .


Equal amount paid at the end of each year to repay the loan is termed as an annuity.

answered by: Tulsiram Garg
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