PART I Ifyou were to put $1,000 every year in the bank at 6% annual interest rat
ID: 2803523 • Letter: P
Question
PART I Ifyou were to put $1,000 every year in the bank at 6% annual interest rate for the xt ten count? ch table would you use to find the ending balance in your A) Present value of $1 B) Future value of $I C) Present value of an annuity of S1 D) Future value of an annuity of $I As the interest rate increase, the present value of an amount to be received at the of a fixed period A) increases C) remains the same D) not enough information to tell Finding the current value of $1000 to be received at the end of every year for 5 rs requires calculating: a. The compound sum of an annuity (CSAM) b. The present value of an annuity (PVAN) c. An annuity due d. none of the above bank deposits pay 2% nominal interest per year. The highest effective interest (Based on the following choices) on this deposit would be had by using compounding. a. Monthly b. Annually c. Daily d. Semiannually Page 2Explanation / Answer
1)
Answer : C
Future Value of annuity table needs to be used as $ 1000 is an anuuity every year and the accumulation at the end of the period is the Future Value.
2)
Answer B
Present Value is the discounted value of future value to be received at the end of period. As the discount rate increases the present value will decrease.
3)
Answer ;D none of these
Finding current value requires the use of formula Present Value of that future value in this case $ 1000.
Compounded sum of annuity refers to the costant payments made at the end of each time period. Present value of an annuity refers to the present value of set of cash flows over a period.
Annuity due is a repeated payment made at beginning of each period.
4)
Answer :C, Daily
The higher the compunding periods the highest is the effective interest rate.
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