QUESTION 11

You have a chance to buy an annuity that pays $2,500 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

	a.	$5,782.85
	b.	$6,087.21
	c.	$6,744.83
	d.	$5,493.71
	e.	$6,407.59

1 points

QUESTION 12

Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $50,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7%. How much would it cost her to buy such an annuity today?

	a.	$667,214
	b.	$620,452
	c.	$635,442
	d.	$700,575
	e.	$574,924

1 points

QUESTION 13

Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?

	a.	The periodic rate of interest is 4% and the effective rate of interest is less than 8%.
	b.	The periodic rate of interest is 2% and the effective rate of interest is 4%.
	c.	The periodic rate of interest is 2% and the effective rate of interest is greater than 8%.
	d.	The periodic rate of interest is 8% and the effective rate of interest is also 8%.
	e.	The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.