In Case of an Annuity with a Spread of 3

question 380

Multiple Choice

In case of an annuity with a spread of 3%, if the index gained 9%, the return credited to the annuity would be:

• A) 11%
• B) 27%
• C) 6%
• D) 3%

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Definitions:

Compounded Monthly

The process of adding interest to the initial amount of a loan or deposit on a monthly basis, causing the total amount to grow at an increasing rate.

Compounded Annually

An interest calculation method where interest is calculated once a year and added to the principal, leading to an increase in the amount of subsequent interest.

RRSP

Registered Retirement Savings Plan (RRSP) is a Canadian financial account designed for individuals to save for retirement, offering tax benefits to incentivize saving.

Compounded Quarterly

Interest on a loan or investment is calculated four times a year, with each interest payment added to the principal.