# Various Annuity- Related Questions

1. $111,834 is the amount of an ordinary annuity of $6,000 for 4 years at 8% compounded quarterly. ()

True

False

2. The monthly payment of rent is an example of a renter's annuity. ()

True

False

3. A contingent annuity has a specific number of payment periods. ()

True

False

4. An annuity with payments made at the end of each period is called an ordinary annuity. ()

True

False

5. With an annuity due no interest is paid in the first period. ()

True

False

6. The amount of an $8,000.00, 10%, 5 year ordinary annuity compounded semiannually is $100,624. ()

True

False

7. The maturity value of a transaction is equal to the principal plus the rate. ()

True

False

8. The deposits or payments are made at the end of the period in ordinary annuities. ()

True

False

9. John owns five health food stores in the Columbia area, and they are realizing a good profit. John decides to invest a portion of the profits in an annuity offered by Penn Life Insurance. Penn Life will guarantee John 8% interest compounded quarterly for the first 5 years, as long as he deposits $10,000.00 every quarter of the term of the guaranteed rate. Assuming John fulfills the obligations of the investment, what will be the value of the investment at the end of the 5 year term? ()

$261,832.74

$245,446.58

$242,970.00

$255,446.40

none of the above

10. The sum of the payments of an annuity plus the interest is called the: ()

economic sum

amount of the annuity

financial total

payoff amount

none of the above

11. An annuity without a specific number of payment periods is termed a(n): ()

non-standard annuity

annual annuity

annuity certain

contingent annuity

none of the above

12. Nancy plays drums in a dance band on weekends in addition to her full-time job at the local junior college. Nancy decided on her 35th birthday to establish her own retirement savings account by investing $2,400.00 of her weekend earnings every six months into an ordinary annuity paying 12% interest compounded semiannually. If Nancy makes these regular deposits until her 65th birthday, how much will this retirement account be worth? ()

$1,297,503.10

$1,281,903.10

$1,297,503.01

$1,279,507.20

none of the above

13. Derek established his own retirement account ten years ago. He has discovered that he can obtain a better rate for the next 10 years at 12% interest compounded semiannually. Consequently, Derek established a new ordinary annuity account (beginning amount $0.00) and he will contribute $7,000.00 semiannually into the account for the next 10 years. What will be the value of this account at the end of the 10 year period? ()

$244,707.61

$83,652.59

$264,501.86

$257,502.00

none of the above

14. The table factor for an annuity due of 4% compounded semiannually for 4 years is: ()

8.923740

7.436704

2.981042

8.582961

none of the above

15. The amount of interest on an ordinary annuity of $11,600.00 for 5 years at 8% compounded semiannually is: ()

$139,269.60

$23,296.60

$116,000.00

$23,269.60

None of the above

#### Solution Preview

See attached file.

1. This is correct. See the attached Excel 97-2003 spreadsheet.

2. This is true.

3. This is false. See question #11. It is contingent because the amount, rate or number of periods is uncertain.

4. This is true.

5. This is true. The first payment is made on the day the contract is signed.

6. This is correct. See the ...

#### Solution Summary

Using an Excel 97-2003 workbook, this solution answers 15 questions related to the present and future values of annuities, as well as the various types of annuities.