Itf Annuity Questions

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question 1) A (n) ____________ is where the first payment is more than one period in the future. A) B) C) D) Deferred annuity Ordinary annuity Perpetual annuity None of these

2) Suppose you save $1,000 per year at the beginning of each year for 15 years and earn 7.49% interest per year. What is the present value of this annuity? A) B) C) D) $9,494.17 $9,514.17 $9,054.17 None of these

3) Suppose you save $4,000 per year at the end of each year for 30 years and earn 5% interest per year. How much will you have at the end of 30 years? A) B) C) D) $265,755.39 $132.877.77 $365,766.39 $600,000.00

4) Suppose you save $2,000 per year at the beginning of each year for 15 years and earn 7.49% interest per year. How much will you have at the end of 15 years? A) B) C) D) $44,052.90 $56,105.80 $46,105.80 None of these

5) Suppose you can save $100 per year at the end of each year for 10 years and earn 5.45% interest per year. However, you cannot start saving for four years (so first deposit is at t-5). How much will you have at the end of 14 years? A) B) C) D) $1,484.53 $6,103.99 $1,284.53 None of these

6) Suppose that the constant and perpetual cash flow is $1,000 at the discount rate is 10%. What is the value of this perpetuity if the first cash flow does not come until three years from today? A) B) C) D) $8,274.46 $8,264.46 $8,284.46 None of these

1) 2) 3) 4) 5) 6)

A A A B C B