You Have a Chance to Buy an Annuity That Pays

question 109

Multiple Choice

You have a chance to buy an annuity that pays $1,400 at the beginning of each year for 3 years.You could earn 5.5% on your money in other investments with equal risk.What is the most you should pay for the annuity?

• A) $3,984.85
• B) $3,945.00
• C) $3,745.76
• D) $4,223.94
• E) $4,781.82

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Definitions:

Cash Flow

The total amount of money being transferred into and out of a business, determining its liquidity, operational efficiency, and financial health.

Cash-Flow Statement

A financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Service Policies

Guidelines and procedures established by a business concerning the delivery of its services to customers.

Sales Force

The Sales Force consists of a group of employees focused on sales operations, whose primary responsibilities include promoting, selling, and securing orders from existing and prospective customers.