An Annuity Consists of Payments of $400 at the Beginning

question 107

Multiple Choice

An annuity consists of payments of $400 at the beginning of each month with an annual rate of 7.1 per cent. Is this an ordinary annuity or an annuity due?

• A)ordinary annuity
• B)annuity due

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Definitions:

Cost Method

An accounting method used to value an investment, based on the purchase price of the asset.

Gross Profit

The difference between sales revenue and the cost of goods sold, reflecting the fundamental profitability of the goods sold.

Cost Method

An accounting approach used for investments, wherein the investment is recorded at cost and adjusted only for dividends received, impairments, or changes in fair value.

Consolidated Income Statement

A financial statement that presents the combined financial results of a parent company and its subsidiaries as one single entity.