MBF-4E-11-01-Deferred_Annuities
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Seneca College *
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MBF101
Subject
Accounting
Date
Feb 20, 2024
Type
pptx
Pages
7
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Slide: 1
DEFERRED ANNUITIES
11.1
Slide: 2
A deferred annuity
is an annuity in which the first periodic payment is made after a certain interval of time, known as the deferral period
. The deferral period is the time interval from ‘now’ to the beginning of the annuity period.
Deferred Annuities
Section 11.1
Ordinary Deferred Annuity: When the deferral period is the time interval from ‘now’ to the beginning of the annuity.
Deferred Annuity Due: When the deferral period ends at the beginning of the first periodic payment.
The Ordinary deferred Annuity or Deferred Annuity Due can be simple or general based on the payment and compounding period.
Slide: 3
A deferred annuity
is an annuity in which the first periodic payment is made after a certain interval of time, known as the deferral period
. The deferral period is the time interval from ‘now’ to the beginning of the annuity period.
Deferred Annuities
Section 11.1
A deferred annuity due can be turned into an ordinary deferred annuity.
PMT
PMT
PMT
Deferral Period
1
st
PMT
n
th
PMT
Annuity Period
PMT
PMT
PMT
Deferral Period
1
st
PMT
n
th
PMT
Annuity Period
Deferred Annuity Due
Ordinary Deferred Annuity
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Related Questions
6 [Question text] An ordinary annuity is best defined as __________________.
Select one:
A. increasing payments paid forever
B. equal payments paid at the beginning of regular intervals for a limited time period
C. equal payments paid at the end of regular intervals over a stated time period
D. increasing payments paid for a definitive period of time
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Question 1
Saved
An annuity with periodic payments made at the end of each payment period is
called:
A) ordinary
Oi general
Cannuity due
O simple
Onone of the above
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An annuity due is an annuity for which:
Question 10 options:
A)
the payments are made to repay a loan
B)
the payments are made at the beginning of each payment period
C)
the payments continue forever
D)
the payments are made at the end of each payment period
E)
the payment period is not the same as the conversion period
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Question 15
Annuities where the payments occur at the beginning of cach time period are called
ahereas
refer to annuity streams with payments occurring at the end ofexhine period
O ordinary for regular) annuities annuities due
O annuities due, ordinary lor regulari annutles
OLte anouties straight anuities
ordinany annuities carly annuities
straight annuities, late annuities
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Question 20
Annuity Due is a type of annuity wherein the payment is made at the beginning of each period.
A True
False
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Problem 8: Present Value of an Annuity
Refer to each case in the table below to answer what are required in this problem.
Find the present value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
Compare your findings in parts a(1) and a(2). All else being identical, which type of
annuity—ordinary or annuity due—is preferable? Explain why
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Question 10
The formula for the Present Value of Deferred Annuity
is P.
1-(1+ )"
(1+.
A
True
False
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Annuities where the payments occur at the beginning of each time period arecalled
refer to annuity streams with payments occurring at the end of each ine period.
where
O ordinary lor regular) annuities annuities due
annuities due, ordinary (or regularl annuities
O ute annuitie straight annuties
straight annuities late aonuities
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A series of equal payments occurring at equal interval of time, known as. Ans: ____________
A type of annuity where the first payment is made at the end of the first period. Ans: ___________________
A type of annuity whose sum is infinite. Ans: _____________
A type of annuity where the first payment is made at the beginning of the first period. Ans: ______________
A type of annuity where the first payment is made later after the end of the first period. Ans: ___________________
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→
Question 1
A
usually involves some constant periodic payment which pays for both interest and
principle over some specified period of time.
Question 2
A
involves some constant periodic payment which pays for interest over some period of
time and a lump sum final payment at the end of the term .
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An [Select]
is a sequence of equal period payments. If payments are made at
the end of each time interval, the annuity is called an [Select]
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Annuity due is an annuity whose payment is due at the END of each period.
TRUE OR FALSE?
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General Term used to defined a series of equal payments occurring at equal interval of time.
Inflation
Discount
Interest
Annuity
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An annuity due is one in which _____.
a.
payments or receipts occur at the beginning of each period
b.
payments or receipts occur at the end of each period
c.
cash flows occur continuously
d.
payments or receipts occur forever
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(3-4.) The following terms of payment for an annuity are as follows:
Periodic payment = 20,000
Payment interval = 1 month
Interest rate
= 18% compounded monthly
Terms
= 15 years
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Problem 5
Given the following spot rates and forward rates (in percents) for the effective years:
Rate/Year
Spot
Forward
4.
5
8.
9
4.
10
7.
7.
8
6.
3
2
4.
8.
8
4
Find the present value factor of an annuity immediate under both schemes.
(These figures may not match because the rates aren't designed to match.)
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1. Which statement is FALSE?
A. Future value annuity is an example of annuity.
B. A perpetuity is an annuity that has maturity period.
C. An annuity is a series of equal payment made for a specified number of years.
D. Ordinary annuity is an annuity in which the cash flows occur at the end of each period.
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Annuities where the payments occur at the end of each time
period are called
whereas
refer to annuity
streams with payments occurring at the beginning of each time
neriod
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Question 2
The APR is approximately double the add-on rate on an installment loan.
True
False
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Help
Save &
The difference between an ordinary annulty and an annulty due Is:
Multiple Choice
an ordinary annuity represents a present value and an annuity due represents a future value.
an ordinary annuity represents a future value and an annuity due represents a present value.
an ordinary annuity assumes the cash flows occur at the beginning of the period and an annuity due assumes the cash flows occur at the end of the period.
an ordinary annuity assumes the cash flows occur at the end of the period and an annuity due assumes the cash flows occur at the beginning of the period.
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Question 9
Calculate the nominal rate for each of the following general ordinary annuities given the present or future value of the annuity Note. Please make sure your final answer(s) are in percantage
form and are accurate to 2 decimal places. For example 34 56%
Periodic
payments
Payment
interval
Interest Compounding Present or Future
frequency
Term
Rate
value
Every quarter year 12 years, 6 months 0.00%
Every quarter year 12 years, 3 months 0.00% Semi-annually FV = $70,943.40
$800.00
Semi-annually PV = $30,946.62
$900.00
SAVE AND CLOSE
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QUESTION 5
At an annual effective interest rate of i, >0, the present value of a perpetuity paying 100 at the end of each 2-year period, with the
first payment at the end of year 2, is 400.
At the same annual effective rate of i, the present value of a perpetuity paying 11 at the end of each 6-month period, with first
payment at the end of 6 months, is X.
Calculate X
O 178.1
O 191.7
O 193.7
O 200.5
O 201.2
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march eacg Letter to the correct number answer to the left:
1. Interest
2. Monetary asset
3. Compound interest
4. Simple interest
5. Annuity
6. Present value of a single amount
7. Annuity due
8. Future value of a single amount
9. Ordinary annuity
10. Effective rate or yield
11. Nonmonetary asset
12. Time value of money
13. Monetary liability
1. ______
2. ______
3. ______
4. ______
5. ______
6. ______
7. ______
8. ______
9. ______
10. ______
11. ______
12. ______
13. ______
a. First cash flow occurs one period after agreement begins
b. The rate at which money will actually grow during a year
c. First cash flow occurs on the first day of the agreement
d. The amount of money that a dollar will grow to
e. Amount of money paid/received in excess of amount borrowed/lent
f. Obligation to pay a sum of cash, the amount of which…
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An even stream of payments over equal time periods where the interest rate is
constant is referred to as a(n):
a) Post-annuity.
Ob) Annuity.
c) Pre-annuity.
d) Accumulated Annuity due.
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Related Questions
- 6 [Question text] An ordinary annuity is best defined as __________________. Select one: A. increasing payments paid forever B. equal payments paid at the beginning of regular intervals for a limited time period C. equal payments paid at the end of regular intervals over a stated time period D. increasing payments paid for a definitive period of timearrow_forwardQuestion 1 Saved An annuity with periodic payments made at the end of each payment period is called: A) ordinary Oi general Cannuity due O simple Onone of the abovearrow_forwardAn annuity due is an annuity for which: Question 10 options: A) the payments are made to repay a loan B) the payments are made at the beginning of each payment period C) the payments continue forever D) the payments are made at the end of each payment period E) the payment period is not the same as the conversion periodarrow_forward
- Question 15 Annuities where the payments occur at the beginning of cach time period are called ahereas refer to annuity streams with payments occurring at the end ofexhine period O ordinary for regular) annuities annuities due O annuities due, ordinary lor regulari annutles OLte anouties straight anuities ordinany annuities carly annuities straight annuities, late annuitiesarrow_forwardQuestion 20 Annuity Due is a type of annuity wherein the payment is made at the beginning of each period. A True Falsearrow_forwardProblem 8: Present Value of an Annuity Refer to each case in the table below to answer what are required in this problem. Find the present value of the annuity, assuming that it is (1) An ordinary annuity. (2) An annuity due. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity—ordinary or annuity due—is preferable? Explain whyarrow_forward
- Question 10 The formula for the Present Value of Deferred Annuity is P. 1-(1+ )" (1+. A True Falsearrow_forwardAnnuities where the payments occur at the beginning of each time period arecalled refer to annuity streams with payments occurring at the end of each ine period. where O ordinary lor regular) annuities annuities due annuities due, ordinary (or regularl annuities O ute annuitie straight annuties straight annuities late aonuitiesarrow_forwardA series of equal payments occurring at equal interval of time, known as. Ans: ____________ A type of annuity where the first payment is made at the end of the first period. Ans: ___________________ A type of annuity whose sum is infinite. Ans: _____________ A type of annuity where the first payment is made at the beginning of the first period. Ans: ______________ A type of annuity where the first payment is made later after the end of the first period. Ans: ___________________arrow_forward
- → Question 1 A usually involves some constant periodic payment which pays for both interest and principle over some specified period of time. Question 2 A involves some constant periodic payment which pays for interest over some period of time and a lump sum final payment at the end of the term .arrow_forwardAn [Select] is a sequence of equal period payments. If payments are made at the end of each time interval, the annuity is called an [Select]arrow_forwardAnnuity due is an annuity whose payment is due at the END of each period. TRUE OR FALSE?arrow_forward
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