Annuities and Financial Instruments Quiz

What is an annuity?

• A loan agreement

• A type of investment

• A sequence of equal periodic payments

• A sequence of unequal payments

What type of annuity has payments made at the end of each period?

• Due annuity

• Ordinary annuity

• Immediate annuity

• Deferred annuity

In the context of annuities, what does 'PMT' stand for?

• Market rate

• Total amount

• Principal

• Payment

How is the present value of an ordinary annuity calculated?

• Using the formula for present value of a single sum

• Using the formula for future value

• Using a geometric series formula

• Using the formula for total interest

What is the formula for the present value of an ordinary annuity?

• PV = PMT * (1 - (1 + i)^-n) / i

• PV = PMT * (1 + i)^n

• PV = PMT / (1 + i)^n

• PV = PMT * n

If an annuity pays $200 per month for 5 years at 6% compounded monthly, what is the interest rate per period?

• 0.005

• 0.06

• 0.12

• 0.01

What is the future value of an annuity?

• The value of the annuity at the end of the term

• The total amount paid into the annuity

• The total interest earned

• The present value of the annuity

What is the formula for the future value of an ordinary annuity?

• FV = PMT * (1 - (1 + i)^-n) / i

• FV = PMT * (1 + i)^n - 1 / i

• FV = PMT * (1 + i)^n

• FV = PMT * n

What is a mortgage?

• A type of loan secured by property

• A type of annuity

• A type of investment

• A type of bond

What does amortization refer to?

• The total interest paid over the life of a loan

• The process of paying off a debt with regular payments

• The initial amount borrowed

• The final payment of a loan