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| Chapter 12
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This activity contains 10 questions.
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The difference between the amount deposited into an account and the balance in the account is interest.
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False
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With a general annuity, the length of the interest conversion period is the same as the length of the payment interval.
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False
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To calculate the effective rate of interest per payment period, the letter p is the same as the letter c in the formula.
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False
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In the case of an ordinary general annuity, if the interest conversion period is shorter than the payment period, then each payment period contains only a fraction of one conversion period.
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False
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In an ordinary general annuity, if interest is compounded monthly, and payments are made quarterly, the n in the calculation is the number of months in the term of the annuity.
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False
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The FV on the calculator is the same as the FV function in Excel.
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False
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To calculate the payment on a mortgage, both the P/Y and the C/Y must be set at 12.
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False
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The present value of an annuity has the same meaning as the cash value of an annuity.
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False
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The amount shown when the PMT is calculated will be negative since payments are considered to be cash outflows.
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False
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When the term of an annuity is calculated, the number resulting is always in years.
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False
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What type of an annuity where the payment interval is the same as the interest period?
The main difference is that in a simple annuity the payment interval is the same as the interest period while in a general annuity the payment interval is not the same as the interest period.
Is an annuity where the payment interval is the same as the interest compounding period?
As with all ordinary annuities the payments are made at the end of each payment interval. It is also the case that the compounding interval equals the payment interval. This means that if the payment interval is monthly then interest will also be compounded monthly.
What is an annuity where the payment interval?
An annuity is a series of equal payments at regular intervals of time over a period of time. A payment interval is the time between successive payments. The periodic payment of an annuity is the amount deposited or paid for each payment interval.
Which type of annuity in which the payment are made at the end of each period?
An ordinary annuity is an annuity in which the cash flows, or payments, occur at the end of the period.