Practice Types Of Annuities (24.5.1) - Time Value of Money - Management 1 (Organizational Behaviour/Finance & Accounting)

Practice: Types of Annuities

Lesson 24.5.1Time Value of Money

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9 questions

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6 sample questions

Question 1.
Define an ordinary annuity.
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Consider the timing of payment in this type of annuity.
Question 2.
What is the main difference between an annuity due and an ordinary annuity?
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Think about when payments occur for each type.
3Question 3.
What is an ordinary annuity?
- Payments at the beginning of the period
- Payments at the end of each period
- Payments are made monthly
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Think about when these payments occur.
4Question 4.
Is the following statement true or false? 'An annuity due provides less total interest earned compared to an ordinary annuity.'
- True
- False
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Consider when payments are made.
Question 5.
You have invested in an ordinary annuity that pays ₹15,000 per year for 10 years at an interest rate of 6%. Calculate the future value at the end of 10 years.
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Make sure to apply the FV formula for the ordinary annuity correctly.
Question 6.
Calculate the present value of an annuity due that pays ₹8,000 per year for 5 years with a discount rate of 5%.
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Remember, you need to factor in the '1 + r' for annuity due.

5 more questions in this section. Enroll free to practise them all.