Exam Questions Annuities and Sinking Funds Chapter.13 13e - Business Math Procedures 13e Test Bank with Answers by Jeffrey Slater. DOCX document preview.
Practical Business Math Procedures, 13e (Slater)
Chapter 13 Annuities and Sinking Funds
1) An annuity is one lump sum payment.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
2) Maturity value is equal to principal plus interest.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
3) The value of an annuity is the series of payments and interest.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
4) Insurance companies do not use annuities.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
5) A contingent annuity has a fixed amount of payments.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
6) Annuities certain have a specific stated number of payments.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
7) There is only one class of annuities.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
8) An ordinary annuity results in the deposit or payment being made at end of the period.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
9) An annuity due requires that deposits or payments be made at the end of the period.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
10) Interest is not calculated in ordinary annuities.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
11) The maturity value in compounding is like the value of an annuity.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
12) Annuities can be done manually or by computer.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
13) An annuity due provides a lower final value compared with an ordinary annuity.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
14) The same table can be used to find the value of an annuity due if two extra periods are added along with the subtraction of one payment.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
15) All annuities due are based on a semiannual payment.
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
16) The present value of an annuity looks from the present to the future.
Difficulty: 1 Easy
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
17) The amount of money one needs to invest in the future to receive a stream of payments in the present is called the present value of an ordinary annuity.
Difficulty: 1 Easy
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
18) Sinking funds accumulate money in the present to accumulate a specific sum at a predetermined present date.
Difficulty: 1 Easy
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
19) Sinking funds utilize the concept of compound interest.
Difficulty: 1 Easy
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
20) Companies that plan to retire bonds in the future could utilize sinking funds.
Difficulty: 1 Easy
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
21) An annuity is:
A) Not used by lotteries today
B) A one-time payment
C) A stream of payments
D) Never made up of equal payments
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
22) Contingent annuities:
A) Have a fixed amount of payments
B) Pay for 30 years
C) Are only paid by the month
D) Have no fixed amount of payments
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
23) Annuity due payments are made:
A) Monthly
B) At the beginning of the period
C) Yearly
D) At the end of the period
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
24) Ordinary annuity payments are made:
A) At the end of the period
B) Yearly
C) Monthly
D) At the beginning of the period
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
25) In an ordinary annuity the interest on a yearly investment starts building interest:
A) At the beginning of the first period
B) At the end of the first period
C) During the first period
D) After the second period ends
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
26) An annuity due compared with an ordinary annuity results in a:
A) Higher value
B) Lower value
C) Same value
D) Value three times the annuity due
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
27) An annuity due can use the ordinary annuity table if one extra period is added and:
A) Add one payment to total value
B) Subtract one payment from total value
C) Add two payments to total value
D) Subtract three payments from total value
E) None of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
28) Payments in annuities are made:
A) Monthly
B) Quarterly
C) Semiannually
D) Yearly
E) All of these
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
29) The present value of an ordinary annuity:
A) Tells how much money one needs to invest in the future
B) Is a lump sum
C) Can only be calculated manually
D) Indicates how much money needs to be invested today
E) None of these
Difficulty: 1 Easy
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
30) A sinking fund:
A) Requires at the beginning one lump sum payment
B) Is really not an annuity
C) Aids in meeting a future obligation
D) Does not compound its money
E) None of these
Difficulty: 1 Easy
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
31) Ted Williams made deposits of $500 at the end of each year for eight years. The rate is 8% compounded annually. The value of Ted's annuity at the end of eight years is (use the tables in the handbook):
A) $5,318.30
B) $4,318.30
C) $2,837.03
D) $2,873.30
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
32) Nancy Billows promised to pay her son $600 quarterly for four years. If Nancy can invest her money at 20% in an ordinary annuity, she must invest how much today? (Use the tables in the handbook.)
A) $10,759.38
B) $10,759.83
C) $14,194.44
D) $6,861.54
E) $6,502.68
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
33) Joe Sullivan invests $9,000 at the end of each year for 20 years. The rate of interest Joe earns is 8% annually. The final value of Joe's investment at the end of the 20th year on this ordinary annuity is (use the tables in the handbook):
A) $411,588.00
B) $88,362.90
C) $411,858.00
D) $88,632.90
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
34) Lance Rice has decided to invest $1,200 quarterly for five years in an ordinary annuity at 8%. The total cash value of the annuity at end of year 8 is (use the tables in the handbook):
A) $25,196.75
B) $29,156.76
C) $22,711.30
D) $7,039.92
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
35) At the beginning of each year, Bill Ross invests $1,400 semiannually at 8% for nine years. The cash value of the annuity due at the end of the ninth year is (use the tables in the handbook):
A) $38,739.68
B) $37,399.68
C) $37,939.86
D) $37,339.68
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
36) Jones Co. borrowed money that is to be repaid in 12 years. So that the loan will be paid back at end of the 12th year, the company invests $8,000 at end of each year at 5% compounded annually. The amount of the original loan was (use the tables in the handbook):
A) $127,336.80
B) $70,905.60
C) $127,636.80
D) $70,950.60
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
37) Abby Mia wants to know how much must be deposited in her local bank today so that she will receive yearly payments of $18,000 for 20 years at a current rate of 9% compounded annually. (Use the tables in the handbook.)
A) $1,085.82
B) $1,463.13
C) $164,313
D) $163,313
E) None of these
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
38) Lee Associates borrowed $60,000. The company plans to set up a sinking fund that will pay back the loan at the end of 12 years. Assuming a rate of 8% compounded semiannually, the amount to be paid into the fund each period is (use the tables in the handbook):
A) $1,350
B) $1,536
C) $1,653
D) $5,163
E) None of these
Difficulty: 3 Hard
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
39) Ed Sloan invests $1,600 at the beginning of each year for eight years into an account that pays 10% compounded semiannually. The value of the annuity due is (use the tables in the handbook):
A) $41,344.48
B) $1,600.00
C) $38,744.48
D) $37,744.48
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
40) How much would Howard Steele need to invest today so that he may withdraw $12,000 each year for the next 20 years, assuming a rate of 8% compounded annually? (Use the tables in the handbook.)
A) $117,817.20
B) $454,144.00
C) $112,817.20
D) $549,144
E) None of these
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
41) Scott deposits $5,000 at the end of each year into an account for five years. Assuming 6% interest annually, what is the value of his account in five years?
A) $67,060
B) $21,873
C) $30,100
D) $28,185.50
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
42) Connie made deposits of $2,000 at the beginning of each year for four years. The rate she earned is 5% annually. What is the value of Connie's account in four years?
A) $11,051.00
B) $8,260.20
C) $8,260.00
D) $9,051.20
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
43) Jorgen Grace made deposits of $250 at the end of each year for 12 years. The rate received was 6% annually. What is the value of the investment after 12 years?
A) $2,028
B) $3,000
C) $4,217.48
D) $4,200
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
44) At the beginning of each year for 14 years, Sherry Kardell invested $400 that earns 10% annually. What is the future value of Sherry's account in 14 years?
A) $12,309
B) $13,100
C) $14,000
D) $12,709
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
45) Bram Johnson invests $500 at the end of each quarter for 10 years. The account earns 12% interest annually. What is the value of the account at the end of 10 years?
A) $37,700
B) $37,700.60
C) $37,000
D) $3,700
E) None of these
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Match the following terms with their definitions.
A) Paid at end
B) Beginning as well as ending dates
C) Paid at beginning
D) Need to invest today to receive the stream
E) Set aside payments to build to future amount
F) Beginning as well as ending dates, not fixed
G) Sum of series of payments
H) Stream of payments
46) Ordinary annuities
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
47) Present value of annuity
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
48) Value of an annuity
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
49) Sinking fund
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
50) Annuity
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
51) Annuities certain
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
52) Annuity due
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
53) Contingent annuities
Difficulty: 1 Easy
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value); LU 13-02 Present Value of an Ordinary Annuity (Find Present Value); LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.; 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.; 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
Answers: 46) A 47) D 48) G 49) E 50) H 51) B 52) C 53) F
54) Complete this ordinary annuity:
Amount of Payment | Payment Payable | Years | Interest Rate | Value of Annuity |
$9,000 | Semiannually | 4 | 10% | ? |
Table 13-1, Interest = 10% / 2 = 5%, Periods = 4 × 2 = 8; $9,000 × 9.5491 = $85,941.90.
Difficulty: 2 Medium
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
55) Complete this annuity due: (round answer to the nearest cent)
Amount of Payment | Payment Payable | Years | Interest Rate | Value of Annuity |
$750 | Quarterly | 4 | 16% | ? |
Table 13-1, Interest = 16% / 4 = 4%, Periods = 4 × 4 = 16 + 1 = 17; $750 × 23.6975 = $17,773.125 - $750 = $17,023.125
Difficulty: 2 Medium
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
56) Complete present value of an ordinary annuity:
Amount of Annuity Expected | Payment Payable | Years | Interest Rate Earned | Present Value |
$16,000 | Quarterly | 2 | 12% | ? |
Table 13-2, Interest = 12% / 4 = 3%, Periods = 2 × 4 = 8; $16,000 × 7.0197 = $112,315.20.
Difficulty: 2 Medium
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
57) Complete present value of an ordinary annuity:
Amount of Annuity Expected | Payment Payable | Years | Interest Rate Earned | Present Value |
$8,500 | Semiannually | 4 | 10% | ? |
Table 13-2, Interest = 10% / 2 = 5%, Periods = 4 × 2 = 8; $8,500 × 6.4632 = $54,937.20.
Difficulty: 2 Medium
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
58) Using the sinking fund table, complete:
Required Amount Needed | Freq of Payment | Years | Interest Rate | Payment Amount end of each period |
$40,000 | Quarterly | 7 | 8% | ? |
Table 13-3, Interest = 8% / 4 = 2%, Periods = 7 × 4 = 28; $40,000 × .0270 = $1,080.
Difficulty: 2 Medium
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
59) Alice Wolf wants to know how much she will have to invest today in order to receive an annuity of $10,000 for six years if interest is earned at 7% annually. She will make all her withdrawals at the end of each year. How much should she invest?
Table 13-2, Interest = 7% / 1 = 7%, Periods = 6 × 1 = 6; $10,000 × 4.7665 = $47,665.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
60) What must Bill McGuire invest today to receive an annuity of $12,000 for four years semiannually at a 10% annual rate? All withdrawals will be made at the end of each period.
Table 13-2, Interest = 10% / 2 = 5%, Periods = 4 × 2 = 8; $12,000 × 6.4632 = $77,558.40.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
61) How much will the Apple Corporation have to set aside each year to have $60,000 ten years from now? Assume interest is at 10% compounded semiannually.
Table 13-3, Interest = 10% / 2 = 5%, Periods = 10 × 2 = 20; $60,000 × .0302 = $1,812.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
62) Roger Fox made deposits of $900 semiannually to Reed Bank at the end of each period, which pays 6% interest compounded semiannually. After seven years Roger made no more deposits. What will be the balance in the account eight years after the last deposit?
Table 13-1, Interest = 6% / 2 = 3%, Periods = 7 × 2 = 14; 17.0863 × $900 = $15,377.67; Table 12-1, Interest = 6% / 2 = 3%, Periods = 8 × 2 = 16; $15,377.67 × 1.6047 = $24,676.55.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
63) Jim Hunter is ready to retire to Florida. What amount should Jim invest today so that he will be able to withdraw $25,000 at the end of each year for 30 years after he retires? Assume he can invest money at 9% interest compounded annually.
Table 13-2, 9% / 1 = 9%, 30 × 1 = 30 periods; $25,000 × 10.2737 = $256,842.50.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
64) Mike O'Brien plans to deposit $1,250 at the end of every six months for the next eight years at 6% interest compounded semiannually. What is the value of Mike's annuity at the end of eight years?
Table 13-1, Interest = 6% / 2 = 3%, 8 × 2 = 16 periods; $1,250 × 20.1569 = $25,196.13.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
65) Abby's Uncle Howard has promised her a gift upon graduation from high school of $2,000 or $200 every quarter for the next three years. If the money could be invested at 8%, which offer should Abby choose? (Show your calculations.)
Table 13-2, Interest = 8% / 4 = 2%, Periods = 3 × 4 = 12, $200 × 10.5753 = $2,115.06; Since this is higher than $2,000, this is what Abby should choose.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
66) Rita Heckt wants to receive $4,200 each year for 15 years. How much must Rita invest today at 5% compounded annually?
Table 13-2, Interest = 5% / 1 = 5%, Periods = 15 × 1 = 15; $4,200 × 10.3796 = $43,594.32.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
67) In 10 years, Longin Company will have to repay a $60,000 loan. Assume an 8% interest rate compounded quarterly. How much must Longin pay each period to have the $60,000 at the end of 10 years? Verify your result.
Verified by taking $996 and using the annuity table.
Table 13-3, Interest = 8% / 4 = 2%, Periods = 10 × 4 = 40; $60,000 × .0166 = $996; Verify: Table 13-1, $996 × 60.4017 = $60,160.09 (off due to rounding of table values.)
Difficulty: 3 Hard
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.; 13-03 (2) Check table lookup by using ordinary annuity table.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
68) Block Associates borrowed $75,000. The company plans to set up a sinking fund that will repay the loan after 16 years. Assume an 8% interest rate compounded semiannually. What must Block Associates pay into the fund each period?
Table 13-3, Interest = 8% / 2 = 4%, Periods = 16 × 2 = 32, $75,000 × .0159 = $1,192.50.
Difficulty: 3 Hard
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
69) Angel Rowe wants to receive $7,500 each year for the next 25 years. Assume a 5% interest rate compounded annually. How much should Angel invest today?
Table 13-2, Interest 5% / 1 = 5%, Periods = 25 × 1 = 25, $7,500 × 14.0939 = $105,704.25.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
70) At the beginning of each period for 9 years, Scott Sullivan invested $900 at 4% interest compounded semiannually. What is the value of this annuity due?
Table 13-1, Interest = 4% / 2 = 2%, Periods = 9 × 2 = 18 + 1 = 19; $900 × 22.8405 = $20,556.45 - $900 = $19,656.45.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
71) Gail Korosa decided that in six years she will leave her job in publishing and retire to Arizona. What amount should Gail invest today so that she will be able to withdraw $50,000 at the end of each year for 30 years after she retires? Assume she can invest money at 5% interest compounded annually.
Table 13-2, Interest = 5% / 1 = 5%, Periods = 30 × 1 = 30; $50,000 × 15.3724 = $768,620. Table 12-3, Interest = 5% / 1 = 5%, Periods = 6 × 1 = 6; $768,620 × .7462 = $573,544.24.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
72) Find the value of an investment after four years for a $7,000 ordinary annuity at 10% compounded annually.
Table 13-1, Interest = 10% / 1 = 10%, Periods = 4 × 1 = 4; $7,000 × 4.6410 = $32,487.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
73) Find the value of an investment after five years for a $6,000 ordinary annuity at 8% compounded annually.
Table 13-1, Interest = 8% / 1 = 8%, Periods = 5 × 1 = 5; $6,000 × 5.8666 = $35,199.60.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
74) Find the value of an investment after four years for a $7,000 annuity due at 10% compounded annually.
Table 13-1, Interest = 10% / 1 = 10%, Periods = 4 × 1 + 1 = 5; $7,000 × 6.1051 = $42,735.70 - $7,000 = $35,735.70.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
75) Find the value of an investment after six years for a $7,000 annuity due at 8% compounded annually.
Table 13-1, Interest = 8% / 1 = 8%, Periods = 6 × 1 + 1 = 7; ($7,000 × 8.9228) - $7,000 = $55,459.60.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
76) Find the value of an investment after four years on $6,000 made quarterly at 8% for (A) an ordinary annuity and (B) an annuity due.
A. Table 13-1, Interest = 8% / 4 = 2%, Periods = 4 × 4 = 16; $6,000 × 18.6392 = $111, 835.20; B. Table 13-1, Interest = 2%, Periods = 16 + 1 = 17; ($6,000 × 20.0120) - $6,000 = $114,072.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
77) Find the value of an investment after three years on $15,000 made quarterly at 8% for (A) an ordinary annuity and (B) an annuity due.
A. Table 13-1, Interest = 8% / 4 = 2%, Periods = 3 × 4 = 12; $15,000 × 13.4120 = $201,180; B. Table 13-1, Interest = 8% / 4, Periods = 3 × 4 = 12 + 1 = 13; ($15,000 × 14.6803) - $15,000 = $205,204.50.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
78) Alice Wolf wants to know how much she will have to invest today in order to receive an annuity of $6,000 for four years if interest is earned at 10% annually. She will make all her withdrawals at the end of each year. How much should Alice invest?
Table 13-2, Interest = 10% / 1 = 10%, Periods = 4 × 1 = 4; 3.1699 × $6,000 = $19,019.40.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
79) Art Newner wants to know how much he will have to invest today in order to receive an annuity of $8,000 for three years if interest is earned at 10% annually. He will make all his withdrawals at the end of each year. How much should Art invest?
Table 13-2, Interest = 10% / 1 = 10%, Periods = 3 × 1 = 3; $8,000 × 2.4869 = $19,895.20.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
80) What must Bill McGuire invest today to receive an annuity of $9,000 for four years semiannually at an 8% annual rate? All withdrawals will be made at the end of each period.
Table 13-2, Interest = 8% / 2 = 4%, Periods = 4 × 2 = 8; $9,000 6.7327 = $60,594.30.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
81) What must John Sullivan invest today to receive an annuity of $6,000 for three years semiannually at a 10% annual rate? All withdrawals will be made at the end of each period.
Table 13-2, Interest = 10% / 2 = 5%, Periods = 3 × 2 = 6; $6,000 × 5.0757 = $30,454.20.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
82) How much will the Apple Corporation have to set aside each period to have $40,000 eight years from now? Assume money is at 12% compounded semiannually.
Table 13-3, Interest = 12% / 2 = 6%, Periods = 8 × 2 = 16; $40,000 × .0390 = $1,560.
Difficulty: 3 Hard
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.; 13-03 (2) Check table lookup by using ordinary annuity table.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
83) How much will the Van Company have to set aside each period to have $60,000 twelve years from now? Assume money is at 12% compounded semiannually.
Table 13-3, Interest = 12% / 2 = 6%, Periods = 12 × 2 = 24; $60,000 × .0197 = $1,182.
Difficulty: 3 Hard
Topic: LU 13-03 Sinking Funds (Find Periodic Payments)
Learning Objective: 13-03 (1) Calculate the payment made at the end of each period by table lookup.; 13-03 (2) Check table lookup by using ordinary annuity table.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
84) Al Wright puts $2,000 in a bank at the end of every six months. The bank pays 8% compounded semiannually. Assuming Al does this for four years, what is the total interest he will receive?
Table 13-1, Interest = 8% / 2 = 4%, Periods = 4 × 2 = 8; $2,000 × 9.2142 = $18,428.40; Interest = $18,428.40 - $16,000 = $2,428.40.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
85) Alice Kate puts $2,500 in a bank at the end of every six months. The bank pays 12% compounded semiannually. Assuming Alice does this for four years, what is the total interest she will receive?
Table 13-1, Interest = 12% / 2 = 6%, Periods = 4 × 2 = 8; $2,500 × 9.8975 = $24,743.75; Interest = $24,743.75 - $20,000.00 = $4,743.75.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
86) Jim Hunter decides to retire to Florida in 10 years. What amount should Jim invest today so that he will be able to withdraw $25,000 at the end of each year for 30 years after he retires? Assume he can invest money at 9% interest compounded annually.
Table 13-2, Interest = 9% / 1 = 9%, Periods = 30 × 1 = 30; $25,000 × 10.2737 = $256,842.50; Table 12-3, Interest = 9% / 1 = 9%, Periods = 10 × 1 = 10; $256,842.50 × .4224 = $108,490.27.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
87) Alice Hall made deposits of $300 semiannually to Rey Bank, which pays 8% interest compounded semiannually. After five years Alice made no more deposits. What would be the balance in the account four years from the last deposit?
Table 13-1, Interest = 8% / 2 = 4%, Periods = 5 × 2 = 10; $300 × 12.0061 = $3,601.83; Table 12-1, Interest = 8% / 2 = 4%, Periods = 4 × 2 = 8; $3,601.83 × 1.3686 = $4,929.46.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
88) Use the tables in the handbook. Jackie Bell invests $5,000 at the end of each year for 15 years. The rate of interest Jackie gets is 8% annually. What is the final value of Jackie's investment in this ordinary annuity?
Table 13-1, Interest = 8% / 1 = 8%, Periods = 15 × 1 = 15; $5,000 × 27.1521 = $135,760.50.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (1) Differentiate between contingent annuities and annuities certain.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
89) Use the tables in the handbook. Pam Reed has decided to invest $500 quarterly for five years in an ordinary annuity at 12%. As her financial advisor, calculate for Pam the total cash value of the annuity at the end of year 5.
Table 13-1, Interest = 12% / 4 = 3%, Periods = 5 × 4 = 20; $500 × 26.8704 = $13,435.20.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
90) Use the tables in the handbook. At the beginning of each year, Dick Raven invests $700 semiannually at 8% for eight years. What will be the cash value of this annuity due at the end of year 8?
Table 13-1, Interest = 8% / 2 = 4%, Periods = 8 × 2 = 16 + 1 = 17; $700 × 23.6975 = $16,588.25 - $700.00 = $15,888.25.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
91) Use the tables in the handbook. Bob Fraser promised to pay his son $400 semiannually for six years. If Bob can invest his money at 12% in an ordinary annuity, how much must he invest today to be able to pay his son $400 semiannually for six years?
Table 13-2, Interest = 12% / 2 = 6%, Periods = 6 × 2 = 12; $400 × 8.3838 = $3,353.52.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
92) Use the tables in the handbook. Alvin Roz puts $2,000 in a bond at the end of every six months. The bank pays 12%, compounded semiannually. Assuming Alvin does this for three years; calculate the amount of total interest he will receive.
Table 13-1, Interest = 12% / 2 = 6%, Periods = 3 × 2 = 6; $2,000 × 6.9753 = $13,950.00 - $12,000.00 = $1,950.60.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
93) Use the tables in the handbook. A customer of Mary Co. promised to make semiannual payments of $700 for six years. Assuming the money is invested by Mary Co. at 8%, compounded semiannually, what is the value today of these payments?
Table 13-2, Interest = 8% / 2 = 4%, Periods = 6 × 2 = 12; $700 × 9.3851 = $6,569.57.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
94) Use the tables in the handbook. What must you invest today in order to receive an annuity of $6,000 for four years semiannually at 12%? All withdrawals will be made at the end of each period.
Table 13-2, Interest = 12% / 2 = 6%, Periods = 4 × 2 = 8; $6,000 × 6.2098 = $37,258.80.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (1) Calculate the present value of an ordinary annuity by table lookup and manually check the calculation.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
95) Use the tables in the handbook. What is the value of an investment after three years on an ordinary annuity of $5,000 made semiannually at 12%?
Table 13-1, Interest = 12% / 2 = 6%, Periods = 3 × 2 = 6; $5,000 × 6.9753 = $34,876.50.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
96) Use the tables in the handbook. Given an annuity due of $5,000, 12% semiannually for three years, what is the value of the investment at the end of three years?
Table 13-1, Interest = 12% / 2 = 6%, Periods = 3 × 2 = 6 + 1 = 7; $5,000 × 8.3938 = $41,969.00 -$5,000 = $36,969.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
97) Use the tables in the handbook. Shelley Sands decided to retire to Hawaii in four years. What amount should Shelley invest today so that she will be able to withdraw $20,000 at the end of each year for 30 years after she retires? Assume she can invest money at 7% compounded annually.
Table 13-2, Interest = 7% / 1 = 7%, Periods = 30 × 1 = 30; $20,000 × 12.4090 = $248,180; Table 12-3, Interest = 7%, Periods = 4 × 1 = 4; $248,180 × .7629 = $189,336.52.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
98) Pete Rool made deposits of $6,000 at the end of each quarter to Rote Bank, which pays 8% interest compounded quarterly. After three years, Pete made no more deposits. What would be the balance in the account two years after the last deposit?
Table 13-1, Interest = 8% / 4 = 2%, Periods = 3 × 4 = 12; $6,000 × 13.4120 = $80,472; Table 12-1, Interest = 2%, Periods = 2 × 4 = 8; $80,472 × 1.1717 = $94,289.04.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
99) Rachel deposits $2,000 semiannually for three years. What is the value of her investment at the end of three years assuming she can earn 6% interest?
Table 13-1, Interest = 6% / 2 = 3%, Periods = 3 × 2 = 6; $2,000 × 6.4684 = $12,936.80.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
100) Lisa Schermer wants to receive $5,000 a year for 12 years. How much must she invest today at 12% interest compounded annually?
Table 13-2, Interest = 12%, Periods = 12; $5,000 × 6.1944 = $30,972.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
101) Doubletree Capital Investments deposits $700 semiannually for 6 years into an account that pays 6% interest. What is the balance after the last deposit?
Table 13-1, Interest = 6% / 2 = 3%, Periods = 6 × 2 = 12; $700 × 14.1920 = $9,934.40.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
102) Robin wants to receive $2,500 at the end of each year for the next 10 years. How much should she deposit today at 5% annually?
Table 13-2, Interest = 5% / 1 = 5%, Periods = 10 × 1 = 10; $2,500 × 7.7217 = $19,304.25.
Difficulty: 3 Hard
Topic: LU 13-02 Present Value of an Ordinary Annuity (Find Present Value)
Learning Objective: 13-02 (2) Compare the calculation of the present value of one lump sum versus the present value of an ordinary annuity.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
103) Sherry Siebert invests $2,000 at the end of each six months for five years. Assuming Sherry can receive 6% interest compounded semiannually, what is the value of her investment at the end of five years?
Table 13-1, Interest = 6% / 2 = 3%, Periods = 5 × 2 = 10; $2,000 × 11.4639 = $22,927.80.
Difficulty: 3 Hard
Topic: LU 13-01 Annuities: Ordinary Annuity and Annuity Due (Find Future Value)
Learning Objective: 13-01 (2) Calculate the future value of an ordinary annuity and an annuity due manually and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
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Connected Book
Business Math Procedures 13e Test Bank with Answers
By Jeffrey Slater