[amp_mcq option1=”Amount of annuity depends on duration of annuity payments, principal sum of money, investment period and rate of return” option2=”Amount of annuity does not depend on the principal sum of money” option3=”Investment period has no relation to the amount of annuity” option4=”Annuity is independent of rate of return” correct=”option1″]
The correct answer is: A. Amount of annuity depends on duration of annuity payments, principal sum of money, investment period and rate of return.
An annuity is a series of equal payments made at regular intervals for a fixed period of time. The amount of annuity depends on the following factors:
- Duration of annuity payments: The longer the duration of the annuity payments, the higher the amount of the annuity.
- Principal sum of money: The larger the principal sum of money, the higher the amount of the annuity.
- Investment period: The longer the investment period, the higher the amount of the annuity.
- Rate of return: The higher the rate of return, the higher the amount of the annuity.
Option B is incorrect because the amount of annuity does depend on the principal sum of money. Option C is incorrect because the investment period does have a relation to the amount of annuity. Option D is incorrect because annuity is not independent of rate of return.