Annuity, Compound Interest, and Loan Amortization Schedule
Please read Chapter 5 of Fundamentals of Financial Management, Concise Edition,10th Ed. (link provided)
https://bookshelf(dot)vitalsource(dot)com/#/books/9781337911054/
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Explain whether the following statement is true or false: $100 a year for 10 years is an annuity, but $100 in Year 1, $200 in Year 2, and $400 in Years 3 through 10 does not constitute an annuity. However, the second series contains an annuity.
Would you rather have a savings account that pays 5% interest compounded semiannually or one that pays 5% interest compounded daily? Explain.
What is a loan amortization schedule, and what are some ways these schedules are used?
Your initial response should be a minimum of 200 words. Then write a subsequent response in support of your initial post as well as a response in opposition of your initial post. Each subsequent response should be a minimum of 125 words.
Be sure to incorporate your weekly readings, citing your sources using proper APA (including in-text citations and references).
Time Value of Money
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Time Value of Money
Explain Whether the Following Statement Is True or False: $100 A Year for Ten Years Is an Annuity, but $100 In Year 1, $200 In Year 2, And $400 In Years 3 Through 10 Do Not Constitute an Annuity. However, The Second Series Contains an Annuity.
An annuity is a contract that ensures a person or entity will receive a specific amount of money at regular intervals for a particular period. An annuity protects the investor and guarantees a stable income after retirement. Since most individuals may not own enough assets to sustain them after retirement, they purchase annuity contracts. The amount of money and the length of time are both established beforehand. The first statement is correct because it describes the transaction as consisting of a series of payments of the same amount, one hundred dollars each, paid at specific intervals, such as once a year for a specified period, which in this case is ten years. The second statement is accurate since the payments are not equal, even though they are made at predetermined intervals throughout a predetermined length. Even though the payments are made over a certain period, the amounts paid throughout the first years are not equal even though the payments are made over a set period (Brigham & Houston, 2019). As part of the second series of payments, an annuity was provided for four hundred dollars each year beginning in year three and continuing through year ten; this annuity is included in the series of payments.
Supporting Statement
Since the second series includes an annuity, one can conclude that the claim is accurate. It is a form of sporadic cash flow, and the annuity will provide four hundred dollars annually for the following eight years. The series might begin with an annuity that gives the recipient one hundred dollars each year for the following ten years, followed by an additional premium of one hundred dollars in the second year, and then a subsequent series of payouts that add up to three hundred dollars each year starting in the third year and continuing throug...