If the future value of an annuity is known, then the present value of the annuit

Question

If the future value of an annuity is known, then the present value of the annuity can be found using the present value of a lump sum formula, even if the amount of each annuity payment is unknown.

Select one:

True

False

The value of a bond investment, which provides fixed interest payments, will increase when discounted at a 8% rate rather than at a 11% rate.

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True

False

Tim invested $1,000 in a mutual fund paying 8% per year. John invested $500 in the same fund. If both Tim and John keep their money invested for the same period of time, Tim will end up with twice as much money as John.

Select one:

True

False

When solving time value of money problems on a financial calculator, you must select the "end mode" when you enter the final years cash flow.

Select one:

True

False

Explanation / Answer

Each annuity payment is required for calculation of present value of annuity.

Present value of annuity = P×[1-(1÷(1+r)^n))]÷r

r is interest rate

P is payment per period

n is number of payments

Given statement is “False”

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