Asked by Mayesha Tanjeen on May 09, 2024
Verified
Tomas wants to save $1,200 a year in a manner that maximizes his savings. To do this, he should:
A) Deposit $1,200 into his savings account on the last day of each year.
B) Treat his $100 monthly savings deposits as an annuity due.
C) Treat his $100 monthly savings deposits as an ordinary annuity.
D) Deposit $300 into his account at the end of each quarter.
E) Deposit $600 into his account at the end of every six month period.
Annuity Due
An annuity in which the payments are made at the beginning of each period; contrast with ordinary annuity, where payments are made at the end of the period.
Ordinary Annuity
Uniform payments issued at sequential period endings, over a pre-defined timespan.
Savings Account
A deposit account held at a bank or financial institution that offers interest earnings and the safety of the deposited funds.
- Analyze the impact of payment frequency on the savings and loans.
Verified Answer
MM
Mirti Mariya ArulthasanMay 15, 2024
Final Answer :
B
Explanation :
Treating his $100 monthly savings deposits as an annuity due maximizes his savings because it means he deposits at the beginning of each period, allowing his money more time to earn interest compared to other methods.
Learning Objectives
- Analyze the impact of payment frequency on the savings and loans.