Quiz on Simple Annuities

What is a simple annuity?

• A type of investment with no payments

• A loan with variable interest

• A sum of money paid in regular equal payments

• A one-time payment

What is the payment interval in an annuity?

• The period of time between consecutive payments

• The total duration of the annuity

• The total amount paid

• The interest rate applied

Which of the following is an example of an annuity due?

• Insurance premiums paid at the beginning of the month

• Annual tax payments

• Installment payments at the end of the month

• Monthly rent payments

What is the future value of an ordinary annuity?

• The total amount paid over the term

• The principal amount invested today

• The total of the payments and interest earned at the end of the term

• The interest rate applied to the annuity

What formula is used to calculate the present value of an ordinary annuity?

• PV = R(1 - (1 + i)^n) / (i + 1)

• PV = R(1 + i)^n - 1

• PV = R(1 + i)^n

• PV = R(1 - (1 + i)^-n) / i

In which type of annuity are payments made at the end of each payment interval?

• Annuity Due

• Contingent Annuity

• Perpetuity

• Ordinary Annuity

What is the term of an annuity?

• The interest rate applied

• The time from the beginning of the first payment interval to the end of the last payment interval

• The frequency of payments

• The total amount paid

Which of the following is a characteristic of a perpetuity?

• It has a definite start and end date

• It is payable for an indefinite duration

• It is always paid annually

• It has a fixed interest rate

What is the periodic rate in the future value formula?

• The principal amount

• The interest rate divided by the number of compounding periods

• The total interest earned

• The total number of payments

How do you determine if a situation illustrates a simple ordinary annuity or a simple annuity due?

• By the duration of the annuity

• By the total amount paid

• By the timing of the payments

• By the interest rate