Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Simon has purchased a fixed immediate annuity. Which of the following best describes what Simon will receive from this investment?

A series of equal payments that begin immediately and continue for a specified period or for life.

Variable payments based on the performance of underlying securities.

Interest payments only, with the principal returned at maturity.

A lump-sum payment at the end of the annuity term.

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Verified step by step guidance

Step 1: Understand the concept of a fixed immediate annuity. A fixed immediate annuity is a financial product where an individual pays a lump sum upfront to an insurance company in exchange for a series of equal payments that begin immediately and continue for a specified period or for life.

Step 2: Analyze the options provided in the question. The correct answer should align with the definition of a fixed immediate annuity, which involves equal payments starting immediately.

Step 3: Eliminate incorrect options. For example, 'Variable payments based on the performance of underlying securities' refers to a variable annuity, not a fixed immediate annuity. Similarly, 'Interest payments only, with the principal returned at maturity' describes a bond or similar investment, not an annuity. Lastly, 'A lump-sum payment at the end of the annuity term' does not match the structure of a fixed immediate annuity.

Step 4: Confirm that the correct answer is 'A series of equal payments that begin immediately and continue for a specified period or for life,' as this matches the definition and characteristics of a fixed immediate annuity.

Step 5: Review the concept of annuities to reinforce understanding. Fixed immediate annuities are designed to provide financial security by offering predictable, regular payments, making them suitable for retirement planning or other long-term financial needs.