Purchase Solution

# Multiple Choice- Annuities

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The future value of a lump sum at the end of five years is \$1,000. The nominal interest rate is 10 percent and interest is compounded semiannually. Which of the following statements is most correct?

a. The present value of the \$1,000 is greater if interest is compounded monthly rather than semiannually.
b. The effective annual rate is greater than 10 percent.
c. The periodic interest rate is 5 percent.
d. Both statements b and c are correct.
e. All of the statements above are correct.

You can earn 8 percent interest, compounded annually. How much must you deposit today to withdraw \$10,000 in 6 years?

a. \$5,402.69
b. \$6,301.70
c. \$6,756.76
d. \$8,432.10
e. \$9,259.26

Please see attached for all questions.

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The future value of a lump sum at the end of five years is \$1,000. The nominal interest rate is 10 percent and interest is compounded semiannually. Which of the following statements is most correct?
a. The present value of the \$1,000 is greater if interest is compounded monthly rather than semiannually.
b. The effective annual rate is greater than 10 ...

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