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Flashcards in Present Values and Annuities Deck (13):
1

What are two example of annuities?

Bond interest payments and lease rental payments

2

When are payments made in regards to ordinary annuity?

At the end of each period

3

When are payments made in regards to annuity due?

At the beginning of each period

4

How do you calculate present value of ordinary annuity?

The number of payments is equal to the number of interest periods

5

How do you calculate present value of annuity due?

The number of interest periods is one less than the number of payments

6

What is the significance of the present value of $1?

The amount that must be invested now at a specific interest rate

7

What is an example of present value of $1?

US Savings Bond

8

What is the significance of the future value of $1?

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

9

What is an example of future value of $1?

Bank savings account

10

What is the significance of a present value of an ordinary annuity?

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

11

What is an example of a present value of an ordinary annuity?

Winning the lottery

12

What is the significance of a future value of an ordinary annuity?

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

13

What is an example of a future value of an ordinary annuity?

Investing in an IRA