Chapter 5: Time Value of Money

Question 1

A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time.

Answer 1

Annuity

Question 2

payments are made at the end of each period.

Answer 2

Ordinary annuity

Question 3

payments are made at the beginning of each period

Answer 3

Annuity due

Question 4

Present value for ___ is higher because you get money faster

Ordinary annuity or annuity due?

Answer 4

annuity due

Question 5

Ordinary or Annuity Due?

Higher PV

Answer 5

Annuity Due

-You get money faster