ASSESSMENT

What is the formula for calculating the future value of a simple annuity?

• FV = PV * (1 + r/n)^(nt)
• FV = P * (1 + r/n)^(nt)
• FV = P * ((1 + r)^n - 1) / r
• FV = P * ((1 + r)^n - 1) / (r * n)

It is an annuity in which payment periods do not coincide with the interest conversion periods.

• simple

• compound

• complex

• general

A payment of 22,456.80 was made at the end of each year for five years into a savings account.  The interest rate on the account is 6% compounded annually.  Find the interest earned on the account.

• 14,307.23

• 9,813.62

• 13,474.08

• 11,228.40

Answer explanation

A sequence of periodic payments paid or received at equal time interval.

• Bonds

• Stocks

• Loans

• Annuity

Which of the following statement is TRUE about bonds?

• Higher risk but with possibility of higher returns.

• Prices vary every day.

• A form of equity financing by allowing investors to be part of the company

• Can be appropriate for retirees or for those who need the money soon.

An Annuity in which the payments are made at the end of each period.

• Simple Annuity

• General Annuity

• Ordinary Annuity

• Annuity Due

An annuity whose periodic payments are made at beginning of each payment interval.

• Simple Annuity

• General Annuity

• Ordinary Annuity

• Annuity Due

It is an annuity in which payment periods coincide with the interest conversion periods.

• compound

• simple

• general

• complex

Which of the following illustrates the simple interest formula?

• P=P x r x t

• FV=P(1+rt)

• MV=F+I

• SI=P x r x t

What type of insurance is more expensive because the premium remains constant throughout the life of the insured?

• Whole Life Insurance

• Limited Payment Insurance

• Term Insurance

• Endowment Insurance