F4 Module 3

Question 1

Ordinary annuity

Answer 1

Payments are made at the end of each period

Question 2

Annuity due

Answer 2

Payments occur at the beginning of each period

Question 3

Present value of $1

Answer 3

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

Future value/(1+r)^n

r = interest rate
n = number of periods

Question 4

Future value of $1

Answer 4

-after that would accumulate at a future point in time if $1 invested now
-interest factor causes future value of $1 to be greater than $1

PV * (1 + r)^n

Question 5

PV of an ordinary annuity

Answer 5

Annuity payment * PV of ordinary annuity of $1 for appropriate n and r

Question 6

PV of an annuity due

Answer 6

PV of ordinary annuity * (1 + r)

Question 7

Future value of an ordinary annuity

Answer 7

Periodic payment * future value of an ordinary annuity of $1 for appropriate n and r