You Own an Ordinary Annuity Contract That Will Pay You

question 47

Multiple Choice

You own an ordinary annuity contract that will pay you $3,000 per year for 12 years.You need money to pay back a loan in 6 years,and you are afraid if you get the annuity payments annually you will spend the money and not be able to pay back your loan.You decide to sell your annuity for a lump sum of cash to be paid to you five years from today.If the interest rate is 8%,what is the equivalent value of your 12-year annuity if paid in one lump sum five years from today?

• A)$22,008
• B)$18,000
• C)$35,876
• D)$38,880

Analyze the impact of wage changes on hours worked and goods consumed.

Understand the concept of perfect complements in consumption.

Calculate and analyze individual’s budget constraint equations.

Evaluate the economic welfare implications of price changes on utility.

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Definitions:

Checkbook Balance

The amount of money currently available in a checking account, according to the account holder's records.

Outstanding Checks

Checks that have been written and recorded in the checkbook but have not yet been cleared or deducted from the bank account.

Automatic Transfer

A prearranged scheme for moving funds from one account to another electronically on a set schedule.

Bank Statement Balance

The total amount of funds in a bank account at the end of a given statement period as recorded by the bank.