Asked by Maryam Jaber on Jul 12, 2024
Verified
Rose Carter wants to determine how much she must deposit today at 14% interest to provide four withdrawals of $6, 000 at the end of each year, beginning five years from now.This is an example of the present value of a(n)
A) ordinary annuity
B) annuity due
C) single sum
D) deferred ordinary annuity
Deferred Ordinary Annuity
A financial product where regular payments are deferred to start at a future date, often used for retirement savings.
Present Value
The current value of a future sum of money or stream of cash flows, discounted at a specific interest rate.
- Discern between traditional annuities and annuities due.
Verified Answer
KC
Katie CoffeyJul 17, 2024
Final Answer :
D
Explanation :
This is an example of a deferred ordinary annuity because the withdrawals start at a future date (five years from now) and occur at the end of each period, which is characteristic of an ordinary annuity. The deferment period before the annuity payments begin distinguishes it from a standard ordinary annuity.
Learning Objectives
- Discern between traditional annuities and annuities due.