There are three categories of cash flows: single cash flows, also referred to as “lump sums,” a stream of unequal cash flows, and annuities.Based on your understanding of annuities, answer the following questions. 1. Which of the following statements about annuities are true? Check all that apply.An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period.An annuity is a series of equal payments made at fixed intervals for a specified number of periods.An annuity due earns more interest than an ordinary annuity of equal time.Ordinary annuities make fixed payments at the beginning of each period for a certain time period.2. Which of the following is an example of an annuity?A job contract that pays a regular monthly salary for three yearsA job contract that pays an hourly wage based on the work done on a particular day3. Eleanor loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $1,300 in her local bank, which pays her 13% annual interest. Eleanor decides that she will continue to do this for the next 3 years. Eleanor’s savings are an example of an annuity.How much will she save by the end of 3 years, rounded to the nearest whole dollar?$5,979$4,429$3,765$5,0054. If Eleanor deposits the money at the beginning of every year and everything else remains the same, she will save by the end of 3 years?

Annuities are very important in daily life and also in the retirement also because they provide…

Answered: are three categories of cash flows:…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA3: Time Value Of Money

Section: Chapter Questions

Problem 4DQ

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There are three categories of cash flows: single cash flows, also referred to as “lump sums,” a stream of unequal cash flows, and annuities.

Based on your understanding of annuities, answer the following questions.

1. Which of the following statements about annuities are true? Check all that apply.

An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period.
An annuity is a series of equal payments made at fixed intervals for a specified number of periods.
An annuity due earns more interest than an ordinary annuity of equal time.
Ordinary annuities make fixed payments at the beginning of each period for a certain time period.

2. Which of the following is an example of an annuity?

A job contract that pays a regular monthly salary for three years
A job contract that pays an hourly wage based on the work done on a particular day

3. Eleanor loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $1,300 in her local bank, which pays her 13% annual interest. Eleanor decides that she will continue to do this for the next 3 years. Eleanor’s savings are an example of an annuity.

How much will she save by the end of 3 years, rounded to the nearest whole dollar?

$5,979
$4,429
$3,765
$5,005

4. If Eleanor deposits the money at the beginning of every year and everything else remains the same, she will save by the end of 3 years?

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