Question

Janis just won a scholarship that will pay her $500 a month, starting today, and continuing for the next 48 months. Which one of the following terms best describes these scholarship payments?
A) Ordinary annuity
B) Annuity due
C) Consol
D) Ordinary perpetuity
E) Perpetuity due

Answer 1

Answer:

B. Annuity due

Explanation:

Annuity Due

This is the repetition of money paid that is made at the beginning of each defined period. Period could be monthly, quarterly, yearly and so on. A common example used in explaining this is Rent paid at the beginning of each month. Annuity due have all payments in the same amount, like in this case, Janis is going to be paid $500 a month for 48 months. Meaning the amount tonbe paid doesnt changes. Also another characteristic of annuity payments is that all payments are paid at thesame time interval. Again, here, Janis is being paid every month at the same time interval NOT, today monthly and the next payment weekly.

It is a series of payments that is made or received over a predetermined period of time.