Which One of the Following Statements Concerning an Ordinary Annuity

question 46

Multiple Choice

Which one of the following statements concerning an ordinary annuity is true?

• A) An ordinary annuity consists of equal payments that occur at the beginning of each period over a set period of time.
• B) If two annuities are equal in every way except that one is an ordinary annuity and one is an annuity due, then the ordinary annuity will have a larger future value than the annuity due.
• C) The future value of an ordinary annuity can be computed by dividing the future value of an annuity due by (1 + r).
• D) If two annuities are equal in every way except that one is an ordinary annuity and one is an annuity due, then the ordinary annuity will have a larger present value than the annuity due.
• E) Most financial calculators can compute ordinary annuity problems but not annuity due problems.

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Definitions:

Break-even Point

The break-even point is the level of production or sales at which total revenues equal total expenses, resulting in neither profit nor loss.

Variable Costs

Expenses that fluctuate with the level of output or sales, such as raw materials and direct labor, making them distinct from fixed costs.

Break-even Point

The point at which total revenues equal total expenses, resulting in no profit or loss for the business.

Unit Variable Cost

The cost associated with producing one additional unit of a product, which typically includes materials and labor.