Question

In: Accounting

Sophie pays $358.75 for a car lease at the beginning of every month for 2 years...

Sophie pays $358.75 for a car lease at the beginning of every month for 2 years and 3 months at 3.62% 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

Solutions

Expert Solution

Answer a

General Annuity Due are that annuities where all the payments made at the beginning of each period and which are compounded and compounded period is not same to the payment period.

In this case, Sophie pays $358.75 for a car lease at the beginning of each period, is an example of General Annuity Due.

Answer b

No of Payments at the beginning of the each period = (12*2) + 3

                                                                                             = 24+3

                                                                                             = 27


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