#1
What is an annuity?
A series of equal periodic payments
ExplanationAn annuity entails regular, uniform payments over a specified period.
#2
Which of the following is NOT a type of annuity?
Non-renewable annuity
ExplanationA non-renewable annuity is not a recognized category in annuity types.
#3
Which of the following statements about annuities is true?
An annuity involves periodic payments.
ExplanationAnnuities consist of regular, scheduled payments.
#4
What is the primary advantage of a fixed annuity?
Guaranteed returns
ExplanationFixed annuities assure predetermined returns, offering stability to investors.
#5
Which of the following is NOT a consideration when choosing an annuity?
Credit score
ExplanationCredit score isn't typically a factor in annuity selection.
#6
What is the 'annuity due' payment mode?
Payments made at the beginning of each period
ExplanationAnnuity due involves payments at the onset of each payment period.
#7
What is the formula to calculate the future value of an ordinary annuity?
FV = Pmt * [(1 + r)^n - 1] / r
ExplanationThe future value formula calculates the sum of future payments for an ordinary annuity.
#8
What is the difference between an ordinary annuity and an annuity due?
Timing of payments
ExplanationThe distinction lies in when payments are made: either at the beginning or end of periods.
#9
Which of the following factors affects the present value of an annuity?
All of the above
ExplanationVarious factors including interest rate, payment amount, and time impact the present value of an annuity.
#10
What is the concept of annuity immediate?
An annuity with immediate payments
ExplanationAnnuity immediate entails payments that commence without delay.
#11
Which of the following is a disadvantage of annuities?
Liquidity constraints
ExplanationAnnuities often restrict access to funds, leading to liquidity challenges.
#12
What is the concept of 'annuitization'?
Converting a sum of money into a series of payments
ExplanationAnnuitization transforms a lump sum into a stream of regular payments.
#13
What does the 'annuity factor' represent?
The present value of an annuity of $1 per period
ExplanationThe annuity factor denotes the current value of a series of $1 payments over time.
#14
In a decreasing annuity, what happens to the payment amount over time?
It decreases
ExplanationPayments in a decreasing annuity diminish as time progresses.
#15
What is a 'life annuity'?
An annuity that pays out for the life of the annuitant
ExplanationA life annuity disburses payments throughout the annuitant's lifetime.
#16
What is the purpose of annuitization?
To convert a lump sum into a stream of payments
ExplanationAnnuitization transforms a lump sum into a structured payment schedule.
#17
What is a contingent annuity?
An annuity that depends on certain conditions being met
ExplanationA contingent annuity's payouts hinge on specific predefined circumstances.