Asked by Carolina Valadez on May 09, 2024
Verified
Annuity G has the same i and PMT as Annuity H. G has twice as many payments as H. Will G's future value be (pick one): (i) double, (ii) more than double, or (iii) less than double the amount of H's future value? Give the reason for your choice.
Future Value
Future value is the value of a current asset at a specified date in the future based on an assumed rate of growth over time.
- Understand how compound interest affects the valuation of annuities, both immediate and deferred.
Verified Answer
AL
Austin LutherMay 12, 2024
Final Answer :
G's future value will be (ii) more than double H's future value. From the pattern of the contributions of individual payments to the annuity's future value, we see that the earlier half of an annuity's payments contribute more to the future value than the latter half of the payments. It follows that doubling the number of payments will more than double an annuity's future value.
Learning Objectives
- Understand how compound interest affects the valuation of annuities, both immediate and deferred.
Related questions
The Rate of Return Offered by Reliance Insurance Co ...
Dr Krawchuk Made Deposits of $2,000 to His RRSP at ...
Charlene Has Made Contributions of $3,000 to Her RRSP at ...
Determine the Unknown Value for the Following Deferred Annuity ...
Determine the Unknown Value for the Following Deferred Annuity ...