Assume You Are to Receive a 10-Year Annuity with Annual

question 6

Multiple Choice

Assume you are to receive a 10-year annuity with annual payments of $100.The first payment will be received at the end of Year 1,and the last payment will be received at the end of Year 10.You will invest each payment in an account that pays 9 percent compounded annually.Although the annuity payments stop at the end of year 10,you will not withdraw any money from the account until 20 years from today,and the account will continue to earn 9% for the entire 20-year period.What will be the value in your account at the end of Year 20 (rounded to the nearest dollar) ?

• A) $38,359
• B) $35,967
• C) $28,000
• D) $19,000

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Definitions:

Note Issuance

The process of creating and distributing a debt security or promissory note, promising to pay back a specified amount of money at a future date.

Face Amount

The nominal value of a security stated by the issuer, for example, the value printed on the face of a bond.

Interest Rate

The percentage of a loan charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage rate.

Note Issuance

The process of creating and distributing a promissory note, which is a financial instrument indicating a promise to pay.