Question 1

When the annuity payment is made at the end of each period, it is known as an ____________________ annuity.

Accepted Answer

ordinary

Question 2

A(n) ____________________ is the payment or receipt of equal cash amounts per period for a specified amount of time.

Accepted Answer

annuity

Question 3

Kia deposited $1,200, at the BEGINNING of each year for 30 years in a credit union account. If the account paid 12% interest, compounded annually, use the appropriate formula to find the future value of her account.
A) $311,097.91
B) $288,399.20
C) $298,569.33
D) $324,351.13

Accepted Answer

The future value of an annuity due can be calculated using the formula: FV = P * [(1 + r)^n - 1] * (1 + r) / r, where P is the annual payment, r is the interest rate, and n is the number of periods. Substituting the given values: P = $1,200, r = 0.12, n = 30, the future value is approximately $324,351.13.

Question 4

____________________ annuities are those in which the annuity payments and compounding periods do not coincide.

Accepted Answer

The answer of ____________________ annuities are those in which the...

Question 5

Benigno deposited $1,000, at the END of every month for 3 years in a savings account. If the account paid 12% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.
A) $3,374.40
B) $4,320.00
C) $40,320.00
D) $43,076.88

Accepted Answer

To find the future value of an annuity (in this case, monthly deposits into a savings account), we use the future value of an annuity formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the payment amount, $r$ is the monthly interest rate (annual rate divided by 12), and $n$ is the total number of payments. Given an annual interest rate of 12%, the monthly interest rate is $12\% / 12 = 1\%$, or 0.01 in decimal form. Benigno makes a total of $3 \times 12 = 36$ payments. Plugging these values into the formula, or using a financial calculator or table designed for this purpose, would give the future value of Benigno's account as approximately $43,076.88 after 3 years, assuming he makes the deposits at the end of each month and the interest is compounded monthly.

Question 6

____________________ annuities are annuities based on an uncertain time period.

Accepted Answer

The answer of ____________________ annuities are annuities based on an...

Question 7

Annuities ____________________ are annuities that have a specified number of time periods.

Accepted Answer

The answer of Annuities ____________________ are annuities that have a...

Question 8

Lidia deposits $900 at the END of each year for 9 years in a savings account. The account pays 8% interest, compounded annually. Lidia calculates that the future value of the ordinary annuity is $11,238.80. What would be the future value if deposits are made at the BEGINNING of each period rather than the END?
A) $11,238.80
B) $12,137.90
C) $12,960.00
D) $13,037.91

Accepted Answer

The answer of Lidia deposits $900 at the END of...

Question 9

Shiraz deposited $500 at the END of each year for 18 years in a savings account. If the account paid 5% interest, compounded annually, use Table 12-1 from your text to find the future value of his account.
A) $12,822.71
B) $12,920.19
C) $14,066.19
D) $15,452.83

Accepted Answer

To find the future value of an annuity (in this case, annual deposits into a savings account), we use the future value of an annuity formula: FV = P * [((1 + r)^n - 1) / r], where P is the payment amount, r is the annual interest rate, and n is the number of periods. Given that Shiraz deposits $500 at the end of each year for 18 years with an interest rate of 5%, we can calculate the future value. However, without performing the calculation directly and assuming the use of a standard financial table (Table 12-1) as mentioned, the correct answer is based on the typical outcome of such a scenario with a 5% interest rate compounded annually for 18 years. The correct choice matches the common result for these parameters in financial tables or calculators designed for calculating the future value of annuities.

Question 10

Use Table 12-1 of your text to find the future value of $1,300 deposited at the BEGINNING of every three months, for 3 years if the bank pays 12% interest, compounded quarterly.
A) $18,789.65
B) $19,955.20
C) $19,003.13
D) $20,830.22

Accepted Answer

This is an annuity due problem because deposits are made at the beginning of each period. To find the future value of an annuity due, you can use the future value annuity due formula or a financial calculator. Given the interest rate is 12% compounded quarterly, and the deposits are made quarterly for 3 years (12 periods), the future value can be calculated accordingly. The correct future value from the options provided that matches the calculation for these parameters is $19,003.13.

Question 11

Peter deposits $500 at the END of every month for 3 years in a savings account. The account pays 12% interest, compounded monthly. Peter calculates that the future value of the ordinary annuity is $21,538.44. What would be the future value if deposits were made at the BEGINNING of each period rather than the END? (Calculate the future value by formula)
A) $21,753.83
B) $25,734.44
C) $22,273.44
D) $22,349.85

Accepted Answer

To find the future value of an annuity due (deposits made at the beginning of each period), you can multiply the future value of an ordinary annuity by (1 + r), where r is the monthly interest rate. The monthly interest rate is 12% per year, or 1% per month (12%/12). The future value of the ordinary annuity is given as $21,538.44. Therefore, the future value of the annuity due is $21,538.44 * (1 + 0.01) = $21,753.83.

Question 12

____________________ are accounts used to set aside equal amounts of money at the end of each period, at compound interest, for the purpose of saving for a future obligation.

Accepted Answer

The answer of ____________________ are accounts used to set aside...

Question 13

The amount that must be deposited now at compound interest to yield a series of equal periodic payments is the ____________________ value of an annuity.

Accepted Answer

The answer of The amount that must be deposited now...

Question 14

The ____________________ value of an annuity is also known as the amount of an annuity.

Accepted Answer

The answer of The ____________________ value of an annuity is...

Question 15

Lorna deposited $1,500, at the BEGINNING of every six months for 12 years, in an account at her credit union. If the account paid 6% interest, compounded semiannually, use Table 12-1 from your text to find the future value of her account.
A) $50,549.75
B) $51,815.72
C) $51,930.92
D) $53,188.89

Accepted Answer

The answer of Lorna deposited $1,500, at the BEGINNING of...

Question 16

John deposited $2,000, at the END of every month for 2 years in a savings account. If the account paid 6% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.
A) $53,374.40
B) $44,320.00
C) $50,320.10
D) $50,863.92

Accepted Answer

To find the future value of an annuity (in this case, monthly deposits into a savings account), we use the future value annuity formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the payment amount, $r$ is the monthly interest rate (annual rate divided by 12), and $n$ is the total number of payments. Given a 6% annual interest rate, the monthly interest rate is $0.06/12 = 0.005$. John makes a $2,000 deposit at the end of every month for 2 years, which equals 24 payments. Plugging these values into the formula, or using a financial calculator or the appropriate table from a textbook (which is designed to simplify this calculation), we find the future value of John's account. The correct answer, based on the information provided and typical financial calculations, is closest to option D, $50,863.92. This accounts for the compound interest earned on the monthly deposits over the 2-year period.

Question 17

Use Table 12-1 of your text to find the future value of $300 deposited at the BEGINNING of every year, for 15 years if the bank pays 6% interest compounded annually.
A) $3,500.00
B) $6,982.79
C) $7,401.76
D) $4,770.00

Accepted Answer

Since the deposit is made at the beginning of each year, this is an annuity due scenario. Using the future value formula for an annuity due or a financial calculator/table for annuities due with a 6% interest rate compounded annually over 15 years, the future value is closest to $7,401.76.

Question 18

____________________ is the opposite of a sinking fund.

Accepted Answer

The answer of ____________________ is the opposite of a sinking...

Question 19

When the payment is made at the beginning of each period, it is called an ____________________.

Accepted Answer

The answer of When the payment is made at the...

Question 20

A(n) ____________________ annuity is one in which the number of compounding periods per year coincides with the number of annuity payments per year.

Accepted Answer

The answer of A(n) ____________________ annuity is one in which...

Quiz 12: Annuities

When the annuity payment is made at the end of each period, it is known as an ____________________ annuity.

A(n) ____________________ is the payment or receipt of equal cash amounts per period for a specified amount of time.

Kia deposited $1,200, at the BEGINNING of each year for 30 years in a credit union account. If the account paid 12% interest, compounded annually, use the appropriate formula to find the future value of her account.

____________________ annuities are those in which the annuity payments and compounding periods do not coincide.

Benigno deposited $1,000, at the END of every month for 3 years in a savings account. If the account paid 12% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.

____________________ annuities are annuities based on an uncertain time period.

Annuities ____________________ are annuities that have a specified number of time periods.

Shiraz deposited $500 at the END of each year for 18 years in a savings account. If the account paid 5% interest, compounded annually, use Table 12-1 from your text to find the future value of his account.

Use Table 12-1 of your text to find the future value of $1,300 deposited at the BEGINNING of every three months, for 3 years if the bank pays 12% interest, compounded quarterly.

____________________ are accounts used to set aside equal amounts of money at the end of each period, at compound interest, for the purpose of saving for a future obligation.

The amount that must be deposited now at compound interest to yield a series of equal periodic payments is the ____________________ value of an annuity.

The ____________________ value of an annuity is also known as the amount of an annuity.

Lorna deposited $1,500, at the BEGINNING of every six months for 12 years, in an account at her credit union. If the account paid 6% interest, compounded semiannually, use Table 12-1 from your text to find the future value of her account.

John deposited $2,000, at the END of every month for 2 years in a savings account. If the account paid 6% interest, compounded monthly, use Table 12-1 from your text to find the future value of his account.

Use Table 12-1 of your text to find the future value of $300 deposited at the BEGINNING of every year, for 15 years if the bank pays 6% interest compounded annually.

____________________ is the opposite of a sinking fund.

When the payment is made at the beginning of each period, it is called an ____________________.

A(n) ____________________ annuity is one in which the number of compounding periods per year coincides with the number of annuity payments per year.