Annuities (and some Simple/Compound Interest)

When is payment made on an ordinary annuity? (From Annuities Notes)

• Beginning of the period

• Middle of the period

• First 3 days of the period

• End of the period

When is payment made on an annuity due? (From Annuities Notes)

• Beginning of the period

• Middle of the period

• Three times during the period

• End of the period

What is the main difference between an annuity and a compound interest investment?

• A series of payments is made for annuities.
• Compound interest investments are for a shorter time period.
• The cash value of annuities can be figured using the compound interest table.
• Annuities involve a series of payments of usually differing amounts, whereas compound investments involve regular contributions of equal amounts.

Find the future value of a quarterly annuity of $2,000 at 8% for 4 years compounded quarterly.

• $32,000.00
• $37,278.00
• $42,240.00
• $36,240.00

An ordinary annuity was purchased 5 years ago. The annuity pays 8% compounded quarterly. The quarterly payments have been $500. What is the amount of interest earned on the annuity to date?

• $2,148.50
• $1,551.78
• $2,867.25
• $1,561.83

Maria deposits $100 every month for 6 years into an account that earns 5% compounded monthly. How much interest will her account have earned?

• $1,176.43

• $7200.00

• $8,376.43

• $2,235.56

401(k), IRA, and Roth IRA are all examples of a __________ account.

• Retirement
• College Savings
• Low Interest
• Stock

Assume Nancy makes semiannual payments of $4,000 into an account for 8 years. Her investment pays 5% semiannually. How much interest will she earn on this investment?

• $13,520.90

• $11,779.99

• $1,600.00

• $1,221.01

The simple interest formula is I=PRT. The P represents the principle. The principle is ___________________.

• the amount of money borrowed or deposited

• the percent interest for his year

• the amount taxed

• the amount the bank owes you for being a customer at their bank

Emilio borrows $1200 from a bank with 8% simple interest per year. How much will he have to pay back total in 2 years? (Use I=PRT and then add the interest to the Principal)

• $150

• $192

• $1350

• $1392