**Annuities and Sinking Funds Related Questions for $4 Only** **1.** $111,834 is the amount of an ordinary ammunity of $6,000 for 4 years at 8% compounded quarterly.

True

False

**2.** The monthly payment of rent is an example of a renter’s annuity.

True

False

**3.** A contingent annuity has a specific number of payment periods. (Points: 2)

True

False

**4.** An annuity with payments made at the end of each period is called an ordinary annuity.

True

False

**5.** With an annuity due no interest is paid in the first period.

True

False

**6.** The amount of an $8,000.00, 10%, 5 year ordinary annuity compounded semiannually is $100,624.

True

False

**7.** The amount of interest on an ordinary annuity of $11,600.00 for 5 years at 8% compounded semiannually is $32,269.00.

True

False

**8.** The maturity value of a transaction is equal to the principal plus the rate.

True

False

**9.** The deposits or payments are made at the end of the period in ordinary annuities.

True

False

**10.** John owns five health food stores in the Columbia area, and they are realizing a good profit. John decides to invest a portion of the profits in an annuity offered by Penn Life Insurance. Penn Life will guarantee John 8% interest compounded quarterly for the first 5 years, as long as he deposits $10,000.00 every quarter of the term of the guaranteed rate. Assuming John fulfills the obligations of the investment, what will be the value of the investment at the end of the 5 year term?

$261,832.74

$245,446.58

$242,970.00

$255,446.40

none of the above

**11.** The sum of the payments of an annuity plus the interest is called the:

economic sum

amount of the annuity

financial total

payoff amount

none of the above

**12.** An annuity without a specific number of payment periods is termed a(n):

non-standard annuity

annual annuity

annuity certain

contingent annuity

none of the above

**13.** Nancy plays drums in a dance band on weekends in addition to her full-time job at the local junior college. Nancy decided on her 35th birthday to establish her own retirement savings account by investing $2,400.00 of her weekend earnings every six months into an ordinary annuity paying 12% interest compounded semiannually. If Nancy makes these regular deposits until her 65th birthday, how much will this retirement account be worth?

$1,297,503.10

$1,281,903.10

$1,297,503.01

$1,279,507.20

none of the above

**14.** Derek established his own retirement account ten years ago. He has discovered that he can obtain a better rate for the next 10 years at 12% interest compounded semiannually. Consequently, Derek established a new ordinary annuity account (beginning amount $0.00) and he will contribute $7,000.00 semiannually into the account for the next 10 years. What will be the value of this account at the end of the 10 year period?

$244,707.61

$83,652.59

$264,501.86

$257,502.00

none of the above

**15.** The amount of interest on an ordinary annuity of $11,600.00 for 5 years at 8% compounded semiannually is:

$139,269.60

$23,296.60

$116,000.00

$23,269.60

None of the above

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