Austin receives $7,500 at the end of every month for 2 years and 1 months for money that he loaned to a friend at 5.66% compounded monthly. a. What type of annuity is this? Ordinary simple annuity Ordinary general annuity Simple annuity due General annuity due b. How many payments are there in this annuity? Round up to the next payment
Question
Austin receives $7,500 at the end of every month for 2 years and 1 months for money that he loaned to a friend at 5.66% compounded monthly. a. What type of annuity is this? Ordinary simple annuity Ordinary general annuity Simple annuity due General annuity due b. How many payments are there in this annuity? Round up to the next payment
Solution
a. To determine the type of annuity, we need to consider the timing of the payments and the compounding period. Since Austin receives payments at the end of every month and the interest is compounded monthly, this is an Ordinary general annuity.
b. To find the number of payments, we need to calculate the total number of months over the 2 years and 1 month period.
- 2 years = 2 * 12 months = 24 months
- Adding the additional 1 month: 24 months + 1 month = 25 months
Therefore, there are 25 payments in this annuity.
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