annulity due hich of the following is an example of an annuity? OA lumo-sum paym

Question

annulity due hich of the following is an example of an annuity? OA lumo-sum payment made to a lfeinsurance company that promises to make a series of equal payments later for some period of time OAn investment in a certificate of deposit (CD) Luana loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $500 in her local bank, which pays her 4% annual interest. Luana decides that will continue to do this for the next six years. Luana's savings are an example of an annuity. How much will she save by the end of six years? $3,449.15 $2,621.07 O $3,316.49 $2,819.02 Itf Luana deposits the money at the beginning of every year and everything ese remains the same, she will save by the end of six years 3,449 $2,725.91 $3,316.4 $4,31144

Explanation / Answer

Question: The first question luana loves shopping......?

Ans: She will save by the end of six years is the future value of annuity, which is:

= 500* [(1+0.04)6-1) / 0.04]

= $3316.49

Question: If luana deposits the money....?

Ans: If she deposits at the begining of the year then that would be future value of annuity due, which is:

= (1+0.04) * [500* [(1+0.04)6-1) / 0.04]]

= $3449.15

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