Future Value of annuities part 2

1. Which statements are true: Check all that apply

A. An annuity due earns more interest than an ordinary annuity of equal time

B. A perpetuity is a constant, infinite stream of equal cash flows that can be thought of as an infinite annuity

C. An annuity due is an annuity that makes a payment at the end of each period for a certain time period D.Ordinary annuities make fixed payments at the end of each period for a certain time period

2. Which of the following is an example of an annuity?

• A lump sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time
• An investment in a certificate of deposit (CD)

3. Luana loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $1,060 in her local bank, which pays 8% annual interest. Luana decides that she will continue to do this for the next 5 years. Luanas savings are an example of an annuity. How much will she save by the end of 5 years?

• 6218.60
• 4232.27
• 5285.81
• 6716.08