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kmarks People Window Help :3113 Aplia: Student Question × ?MindTap-Cengage Learning courses.aplia.com/af/servlet/quiz?quiz action takeQuiz&quiz; probGuid- QNAPCOA8010100000041ca25e00c00 9. 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. Which of the following statements about annuities are true? Check all that apply. When equal payments are made at the end of each period for a certain time period, they are treated as an annuity due When equal payments are made at the end of each period for a certain time period, they are treated as ordinary annuities. An ordinary annuity of equal time earns less interest than an annuity due. A perpetuity is a series of equal payments made at fixed intervals that continue infinitely and can be thought of as an infinite annuity Which of the following is an example of an annuity? O A retirement fund set up to pay a series of regular payments 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 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 $570 in her local bank, which pays her 13% annual interest. Luana decides that she will continue to do this for the next seven years. Luana's savings are an example of an annuity. How much will she save by the end of seven years? o $5,041.05 O $5,930.65 $6,701.64 $2,520.89 If Luana deposits the money at the beginning of every year and everything else remains the same, she will save by the end of seven years.Explanation / Answer
An annuity due is a series of payments in which equal amount is paid at the beginning of each period, while the amounts are paid at the end of each period in case of ordinary annuity, Hence, an annuity due always earns more interest than an ordinary annuity, others factors remaining constant.
1.The following three statements are true:
2.When equal payments are made at the end of each period, they are treated as ordinary annuity- True
3.An ordinary annuity of equal time earns less interest than annuity due – True
4.A perpetuity is a series of payments made at fixed intervals that continue infinitely and can be thought of as an infinite annuity
2. the retirement fund is an example of annuity
The second one is not because dividends are irregular i.e. intervals are not fixed.
Amount at the end of 7 years with 13% interest
=570*((1+r)n-1)/r
=$5,930.65
Hence, ii
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