B is corrent. The desired fund balance on July 1, year 6 ($1,200,000) is a future amount. The series of five equal annual deposits is an annuity in advance. Whether this is an ordinary annuity or an annuity in advance can be determined by looking at the last deposit. The last deposit (7/1/Y5) is made one year prior to the date the future amount is needed. Therefore, these are beginning-of-year payments, and this is an annuity in advance. The deposit amount is computed below.
Future amount
F.A. factor | = | $1,200,000
6.34 | = | $189,274 |
A is incorrect. The desired fund balance on July 1, year 6 ($1,200,000) is a future amount. The series of five equal annual deposits is an annuity in advance. Whether this is an ordinary annuity or an annuity in advance can be determined by looking at the last deposit. The last deposit (7/1/Y5) is made one year prior to the date the future amount is needed. Therefore, these are beginning-of-year payments, and this is an annuity in advance. The deposit amount is computed below.
Future amount
F.A. factor | = | $1,200,000
6.34 | = | $189,274 |
C is incorrect. The desired fund balance on July 1, year 6 ($1,200,000) is a future amount. The series of five equal annual deposits is an annuity in advance. Whether this is an ordinary annuity or an annuity in advance can be determined by looking at the last deposit. The last deposit (7/1/Y5) is made one year prior to the date the future amount is needed. Therefore, these are beginning-of-year payments, and this is an annuity in advance. The deposit amount is computed below.
Future amount
F.A. factor | = | $1,200,000
6.34 | = | $189,274 |
D is incorrect. The desired fund balance on July 1, year 6 ($1,200,000) is a future amount. The series of five equal annual deposits is an annuity in advance. Whether this is an ordinary annuity or an annuity in advance can be determined by looking at the last deposit. The last deposit (7/1/Y5) is made one year prior to the date the future amount is needed. Therefore, these are beginning-of-year payments, and this is an annuity in advance. The deposit amount is computed below.
Future amount
F.A. factor | = | $1,200,000
6.34 | = | $189,274 |
