Present Values and Annuities

Question 1

The amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future

Answer 1

present value of $1

Question 2

The amount that would accumulate at a future point in time if $1 were invested now

Answer 2

future value of $1

Question 3

The current worth of a series of identical periodic payments to be made in the future

Answer 3

present value of an ordinary annuity

Question 4

The sum, to be received at some point in the future, of identical periodic investments made from the present until that future point

Answer 4

future value of an ordinary annuity

Question 5

For a present value and future value of an annuity due, do the calculation for the present or future value of an _______ annuity and add ______

Answer 5

ordinary; 1

Question 6

The _______ of payments is the only difference between an ordinary annuity and an annuity due

Answer 6

timing

Question 7

Ordinary annuities start ______. Annuity due starts _______

Answer 7

later; now

Question 8

Ordinary annuity =

Answer 8

annuity due - 1

Question 9

Also known as “in arrears”

Answer 9

ordinary annuity

Question 10

US Savings bonds, capital lease buyouts (at end of loan), bond principal payoff (at dent of term)

Answer 10

present value of $1

Question 11

Bank savings account

Answer 11

Future value of $1

Question 12

Winning the lottery, periodic lease payments, periodic bond payments

Answer 12

present value of an ordinary annuity

Question 13

Investing in an IRA

Answer 13

future value of an ordinary annuity