A. Read and analyze the following statements. If you think the statement suggests
an incorrect idea, rewrite it on the given space, otherwise leave it blank.
1. An annuity is a sequence of payments made at fived intervals or periods of time
2. In simple annuity, both payment interval and interest period will always be the
same.
3. The ultimate purpose of an annuity is to make sure that the investor will get steady
source of funds.
an incorrect idea, rewrite it on the given space, otherwise leave it blank.
1. An annuity is a sequence of payments made at fived intervals or periods of time
2. In simple annuity, both payment interval and interest period will always be the
same.
3. The ultimate purpose of an annuity is to make sure that the investor will get steady
source of funds.
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Answer:
1. An ordinary annuity is a series of equal payments made at the end of consecutive periods over a fixed length of time. While the payments in an ordinary annuity can be made as frequently as every week, in practice they are generally made monthly, quarterly, semi-annually, or annually.
2. An ordinary annuity is a series of regular payments made at the end of each period, such as monthly or quarterly. In an annuity due, by contrast, payments are made at the beginning of each period. Consistent quarterly stock dividends are one example of an ordinary annuity; monthly rent is an example of an annuity due.
3. Typically you should consider an annuity only after you have maxed out other tax-advantaged retirement investment vehicles, such as 401(k) plans and IRAs. If you have additional money to set aside for retirement, an annuity's tax-free growth may make sense - especially if you are in a high-income tax bracket today.