Multiple Choice
All of the following are true statements regarding the accumulation at interest option except:
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10. Time Value of Money
Time Value of Money Equations
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
An immediate annuity consists of a series of:
A
a single lump-sum payment at the end of the term
B
unequal payments made at irregular intervals
C
equal payments made at the end of each period, starting immediately
D
equal payments made at the beginning of each period, starting immediately
Verified step by step guidance1
Understand the concept of an immediate annuity: An immediate annuity is a financial product where the annuitant starts receiving payments immediately after the initial investment is made.
Clarify the payment structure: Immediate annuities involve equal payments made at regular intervals, typically monthly, quarterly, or annually.
Identify the timing of payments: Payments for an immediate annuity begin at the start of each period, as opposed to the end of the period (which would be a deferred annuity).
Compare with other options: The incorrect options include lump-sum payments at the end of the term, unequal payments at irregular intervals, or equal payments at the end of each period. None of these match the definition of an immediate annuity.
Conclude the correct answer: Based on the definition and characteristics, the correct answer is 'equal payments made at the beginning of each period, starting immediately.'
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