There are two categories of cash flows: single cash flows, referred to as “lump sums,” and annuities. Based on your understanding of annuities, answer the following questions.

Which of the following statements about annuities are true? Check all that apply.

An annuity is a series of equal payments made at fixed intervals for a specified number of periods.

Ordinary annuities make fixed payments at the beginning of each period for a certain time period.

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

An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period.

Which of the following is an example of an annuity?

A job contract that pays an hourly wage based on the work done on a particular day

A job contract that pays a regular monthly salary for three years

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 $570 in her local bank, which pays her 6% annual interest. Luana decides that she will continue to do this for the next four years. Luana’s savings are an example of an annuity. How much will she save by the end of four years?

$1,975.11

$2,643.14

$2,493.53

$2,119.50

If Luana deposits the money at the beginning of every year and everything else remains the same, she will save by the end of four years.