An annuity due is:
a. A series of equal beginning-of-period payments.
b. A payment due to be deposited today to cover a future retirement annuity.
c. A loan payment schedule with the interest paid periodically and the principal due at maturity.
d. A series of equal periodic payments made at the end of each period.
e. An account payable required to be paid today.
An annuity due is:
| a. | A series of equal beginning-of-period payments. | |
| b. | A payment due to be deposited today to cover a future retirement annuity. | |
| c. | A loan payment schedule with the interest paid periodically and the principal due at maturity. | |
| d. | A series of equal periodic payments made at the end of each period. | |
| e. | An account payable required to be paid today. |
Related questions
Which of the following statements aboutannuities are t rue ? Check allthat apply
A When equal payments are made at theend of each period for a certain time period, they are treated asordinary annuities.
B An ordinary annuity of equal time earns less interest than anannuity due.
C When equal payments are made at the end of each period for acertain time period, they are treated as an annuity due.
D A perpetuity is a series of equal payments made at fixedintervals that continue infinitely and can be thought of as aninfinite annuity.
Which of the following is an example ofan annuity?
A A lump-sum payment made to a life insurance companythat promises to make a series of equal payments later for someperiod of time
B An investment in a certificate of deposit (CD)
Luana loves shoppingfor clothes, but considering the state of the economy, she hasdecided to start saving. At the end of each year, she will deposit$710 in her local bank, which pays her 13% annual interest. Luanadecides that she will continue to do this for the nextfive years. Luana's savings are an example of an annuity.How much will she save by the end of fiveyears?
0 | $4,600.99 |
0 | $3,910.84 |
0 | $5,199. 12 |
0 | $2,497.23 |
If Luana deposits the money at thebeginning of every year and everything else remains thesame, she will save____________ by the end of fiveyears.
Amortization Schedule
Consider a $50,000 loan to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 6%.
Set up an amortization schedule for the loan. Round your answers to the nearest cent. Enter "0" if required
| Year | Payment | Repayment Interest | Repayment of Principal | Balance |
| 1 | $ | $ | $ | $ |
| 2 | $ | $ | $ | $ |
| 3 | $ | $ | $ | $ |
| 4 | $ | $ | $ | $ |
| 5 | $ | $ | $ | $ |
| Total | $ | $ | $ | |
How large must each annual payment be if the loan is for $100,000? Assume that the interest rate remains at 6% and that the loan is still paid off over 5 years. Round your answer to the nearest cent.
$
How large must each payment be if the loan is for $100,000, the interest rate is 6%, and the loan is paid off in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part b, but the payments are spread out over twice as many periods. Round your answer to the nearest cent.
$
Why are these payments not half as large as the payments on the loan in part b?
I. Because the payments are spread out over a shorter time period, more interest is paid on the loan, which lowers the amount of each payment.
II. Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.
III. Because the payments are spread out over a longer time period, more principal must be paid on the loan, which raises the amount of each payment.
IV. Because the payments are spread out over a longer time period, less interest is paid on the loan, which raises the amount of each payment.
V. Because the payments are spread out over a longer time period, less interest is paid on the loan, which lowers the amount of each payment.
