Amount of annuity depends on duration of annuity payments, principal sum of money, investment period and rate of return
Amount of annuity does not depend on the principal sum of money
Investment period has no relation to the amount of annuity
Annuity is independent of rate of return
Answer is Right!
Answer is Wrong!
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.