Attempts: Keep the Highest: 7 6. Future value of annuities Aa Aa There are two c

Question

Attempts: Keep the Highest: 7 6. Future value of annuities Aa Aa 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? 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 A retirement fund set up to pay a series of regular payments Katie had a high monthly food bill before she decided to cook at home every day in order to reduce her expenses. She starts to save $850 every year and plans to renovate her kitchen. She deposits the money in her savings account at the end of each year and earns 8% annual interest. Katie's savings are an example of an annuity. If Katie decides to renovate her kitchen, how much would she have in her savings account at the end of two years? O $1,909.44

Explanation / Answer

Question - 1

Check the boxes ......... (2) , (3) and (4)

All these are true statements, Hence select ........ option - 2, Option - 3 and also Option - 4

Question - 2 ........... select - Option - 2

When you are paying a fixed installment to aggregate some fund in future, it is a case of annuity.

Question - 3

Here we have to calculate the future value of annuity of 850 at 8% for 2 years

= 850 * [ (1.08)2 - 1 ] / 0.08 = 1768 ............ select - Option - D

Question - 4

Check for the options available.......... the answer can be (1) More or (2) 1909.44 or (3) 141.44 more.

If you have any trouble with Question - 4 ......... Please comment the options. I shall help you

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