Which of the following statements is correct? The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as every quarter or every year. A series of unequal cash flows that occur at regular intervals, such as every quarter, is an annuity. The cash flows for an ordinary annuity all occur at the beginning of the periods. The cash flows for an annuity due all occur at the ends of the periods.

Which of the following statements is correct? The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as every quarter or every year. A series of unequal cash flows that occur at regular intervals, such as every quarter, is an annuity. The cash flows for an ordinary annuity all occur at the beginning of the periods. The cash flows for an annuity due all occur at the ends of the periods.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The difference between an ordinary annuity and an annuity due is that each of the payments of the annuity due earns interest for one additional year (period). * True False
The (blank) interest rate is referred to as APR and the (blank) interest rate is the true rate considering compounding periods per year
Annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an exception occurs when the annuity payments come at the beginning of each period (termed an annuity due). What is the future value of a 8-year annuity of $3,600 per period where payments come at the beginning of each period? The interest rate is 7 percent. (Round your final answer to 2 decimal places.) Future value
Which of the following is true about perpetuities? O All else equal, the present value of a perpetuity is higher when the interest rate is lower. O All of those three statements are true. O If two perpetuities have the same present value and the same interest rate, they must have the same cash flows. O All else equal, the present value of a perpetuity is higher when the periodic cash flow is higher.
A series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is ________. Group of answer choices a deferred annuity a compound annuity an ordinary annuity an annuity due
PLEASE, WRITE THE SOLUTION ON PAPER, EXPLAINING THE ENTIRE PROCESS, STEP BY STEP
In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. Find the amount of time needed for the sinking fund to reach the given accumulated amount. (Round your answer to two decimal places.) $295 monthly at 5.8% to accumulate $25,000.
The present value of an annuity due is determined on the last day of the first annuity period. on the first day of the last annuity period. on the last day of the last annuity period. on the date of the first cash flow in the series.
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Calculate the future value of the following annuities, assuming each annuity payment is made at the end of each compounding period. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) Annuity Payment Annual Rate Interest Compounded Period Invested Future Value of Annuity 1. $3,100 8.0 % Semiannually 9 years $79,500.77 2. 6,100 10.0 % Quarterly 5 years 3. 5,100 12.0 % Annually 6 years
Which of the following is false? The future value of a deferred annuity is equal to the future value of an annuity not deferred. If the first payment is received at the end of the fifth period, it means the ordinary annuity is deferred for five periods. The present value of a deferred annuity is less than the present value of an annuity not deferred. To calculate the present value of a deferred annuity, determine the present value of an ordinary annuity for the entire period and subtract the present value of the payments which were not received during the deferral period.
Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. In a perpetuity, returns—in the form of a series of identical cash flows—are earned. A perpetuity continues for a fixed time period. A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future. The principal amount of a perpetuity is repaid as a lump-sum amount. Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $15,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit…

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