Chapter 6
Student: ___________________________________________________________________________
1. Which one of the following differentiates an annuity from a perpetuity?
A. discount rate
B. amount of each payment
C. number of payments
D. net present value of the payments
2. You are obligated to pay $150 a month on a loan. Each payment is equal in amount and includes some
interest and some principal. Assuming you always pay on time, the loan will be paid in full when you make
your last monthly payment. Which type of loan do you have?
3. You want to retire on the day you have $2,000,000 in your retirement account. You expect to withdraw
$12,000 a month from the account and earn 7 percent, compounded monthly during your retirement. How many
years can you live after retirement without running out of money?
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