An Annuity Due Can Use the Ordinary Annuity Formula If

question 31

Multiple Choice

An annuity due can use the ordinary annuity formula if the ordinary annuity formula is adjusted:

• A) Add one payment to total value
• B) Multiply results by 1+i
• C) Add two payments to total value
• D) Subtract three payments from total value
• E) None of these

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Definitions:

Amortize

The process of spreading out a loan or intangible asset cost over a specific period of time for accounting and tax purposes.

Par Value

The nominal or face value of a bond, share of stock, or coupon as stated by the issuer; it is not indicative of the security's market value.

Semiannually

Happening biannually or once every six months.

Market Interest Rate

The prevailing rate of interest available in the market on debt, which varies with market conditions and the term and risk of the investment.