FIN 534 WEEK 4 QUIZ 3

Aug 9th, 2016
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Question 1 Which of the following statements is CORRECT? Answer If some cash flows occur at the beginning of the periods while others occur at the ends, then we have what the textbook defines as a variable annuity. The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods. If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity. The cash flows for an annuity due must all occur at the ends of the periods. The cash flows for an annuity must all be equal, and they must occur at regular intervals, such as once a year or once a month. 4 points Question 2 Your bank offers a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. If you invest $2,000 in the CD, how much will you have when it matures? Answer $3,754.27 $3,941.99 $4,139.09 $4,346.04 $4,563.34 4 points Question 3 You are considering two equally risky annuities, each of wh

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FIN 534 WEEK 4 QUIZ 3Question 1Which of the following statements is CORRECT?AnswerIf some cash flows occur at the beginning of the periods while others occur at the ends, then wehave what the textbook defines as a variable annuity.The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series isby definition an annuity.The cash flows for an annuity due must all occur at the ends of the periods.The cash flows for an annuity must all be equal, and they must occur at regular intervals, such asonce a year or once a month.4 pointsQuestion 2Your bank offers a 10-year certificate of deposit (CD) that pays 6.5% interest, compoundedannually. If you invest $2,000 in the CD, how much will you have when it matures?Answer$3,754.27$3,941.99$4,139.09$4,346.04$4,563.344 pointsQuestion 3You are considering two equally risky annuities, each of which pays $15,000 per year for 20years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuitydue. Which of the following statements is CORRECT?AnswerIf the going rate of interest decreases from 10% to 0%, the difference between the present valueof ORD and the present value of DUE would remain constant.The present value of ORD must exceed the present value of DUE, but the future value of ORDmay be less than the future value of DUE.The present value of DUE ex

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