True or False Question If the statement is false, please correct it. 1: Annuitie

Question

True or False Question

If the statement is false, please correct it.

1: Annuities are unequal cash flows that go on for a finite period of time.

2: We can determine which “PTM” we’re being asked to solve for by noting what the problem provides in terms of r and n.

3: When given the annual withdrawals desired during the retirement period, the FVA tells us the amount we should have accumulated by the time we begin the retirement period.

4: Given the amount needed at the beginning of the retirement period, the annual deposits needed during the working period can be found by solving for “PMT” in the FVA formula.

5: “PMT” in the PVA formula tells us the periodic mortgage payment for a fixed-rate fully amortized loan.

6: The principal part of a fixed mortgage loan payment can be found by multiplying the periodic interest rate by ending balance for a given period.

7: For fixed-rate fully amortized mortgage loans, more of the fixed payment goes towards principal as we approach the end of the loan term.

8: We can find the amount needed to pay off a fixed-rate fully amortized mortgage loan at any point in time by solving for the PV of the remaining payments.

Explanation / Answer

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1: False. Annuities are equal cash flows that go on for a finite period of time.

2: False. We can determine which "PMT" we’re being asked to solve for by noting what the problem provides in terms of r and n. Also, we also need its Present Value.

3. False. 3: When given the annual withdrawals desired during the retirement period, the PRESET VALUE OF ANNUITY tells us the amount we should have accumulated by the time we begin the retirement period.

4. True. Given the amount needed at the beginning of the retirement period, the annual deposits needed during the working period can be found by solving for “PMT” in the FVA formula.

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