Example of a renter annuity

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

• True
• False

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

• True
• False

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

• True
• False

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

• True
• False

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

• True
• False

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

• True
• False

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

• True
• False

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

• True
• False

Problem 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

Problem 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

Problem 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

Problem 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

Problem 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

Problem 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

Problem 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

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