If the Future Value of an Ordinary, 7-Year Annuity Is

question 1

Multiple Choice

If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due?

• A) $9,615.38
• B) $10,000.00
• C) $10,400.00
• D) $10,700.00

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Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, taking into account both current income and capital gains or losses.

Zero-coupon Bonds

Debt securities that are issued at a discount to their face value and do not pay interest during their life but are redeemed at full face value at maturity.

Yield To Maturity

The total return expected on a bond if the bond is held until its maturity date, incorporating both interest payments and the capital gain or loss.

Discount

The reduction applied to the nominal or face value of something, typically used in the context of bonds or selling goods and services at below their listed prices.