When payments are made at the beginning of each period, you will treat them as Y

Question

When payments are made at the beginning of each period, you will treat them as You are planning to put 2500 in the bank at the end of each year for the next five year in rupees that will have enough money for a trip around the world. If you are investing at an annual interest rate of 6%, how much money will you have at the end of five years? You decided to deposit your money in the bank at the beginning of the year instead of the end of the year, but now you are making payments of 2750 at an annual interest rate of 5%. How much money will you have available at the end of six years? Which of the following statements about annuities are true? Check all that apply. An annuity is a series of equal payments made at fixed intervals for a specified number of periods. Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. An annuity due earns more interest than an ordinary annuity of equal time. Which of the following is an example of an annuity? A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time An investment in a certificate of deposit (CD) Ash has a large and growing collection of animated movies. She wants to replace her old television with a new LCD model, so she has started saving for it. At the end of each year, she deposits $990 in her bank account, which pays her 14% interest annually. Ash wants to keep saving for two years and then buy the newest LCD model that is available. Ash's savings are an example of an annuity. How much money will Ash have to buy a new LCD TV at the end of two years? Ash deposits the money at the beginning of every year and everything else remains the same, how much will she save by the end of two years?

Explanation / Answer

1) annuity due

2) moent after 5 year = 2500*FVIFA(6%,5) = 2500*5.6371 = $14093

3) FV = 2750*(1.05^6)+2750*(1.05^5)+2750*(1.05^4)+2750*(1.05^3)+2750*(1.05^2)+2750*(1.05^1)

   FV = $19641

4) Ist, IIIrd, and IVth are true only IInd is wrong

5) Ist is an example of annuity

6) FV = 990*1.14+990 = $2118.6

7) FV = 990*1.14^2+990*1.14 = $2415.20

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