Your Grandfather Takes a Reverse Annuity Mortgage on His House

question 7

Multiple Choice

Your grandfather takes a reverse annuity mortgage on his house for $135,000 at 7.00% for five years.His payments are an equal annual annuity of $21,939.If he decides to repay the loan at the end of year three,what amount is owed?

• A) $54,247
• B) $59,529
• C) $75,469
• D) $104,678
• E) $107,507

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Definitions:

N

Common statistical notation representing the sample size or the number of observations in a dataset.

Binomial Distribution

A probability distribution that summarizes the likelihood of a variable to take one of two independent values under a given number of observations.

Probability Of Success

The likelihood of achieving a desired outcome or result in an experiment or project.

Random Variable

A variable whose outcomes are determined by chance, used in probability theory and statistics.