Question

In the table below, we are given two annuity plans, A and B, and the amount invested into each plan every month. Given this information, determine which of the two investments is an ordinary annuity, and the amount invested over a 12 month period.
A 13-column table with 2 rows. Column 1 has entries A, B. Column 2 is labeled January with entries 100, blank. Column 3 is labeled February with entries 100, 100. Column 4 is labeled March with entries 100, 100. Column 5 is labeled April with entries 100, 100. Column 6 is labeled May with entries 100, 100. Column 7 is labeled June with entries 100, 100. Column 8 is labeled July with entries 100, 100. Column 9 is labeled August with entries 100, 100. Column 10 is labeled September with entries 100, 100. Column 11 is labeled October with entries 100, 100. Column 12 is labeled November with entries 100, 100. Column 13 is labeled December with entries blank, 100.
a.
Investment A is an ordinary annuity with an annual contribution of $1,100
b.
Investment A is an ordinary annuity with an annual contribution of $100
c.
Investment B is an ordinary annuity with an annual contribution of $1,100
d.
Investment B is an ordinary annuity with an annual contribution of $100

Answer 1

Answer: c.

Explanation: An ordinary annuity has payments at the end of each period. Row B has payments from February through December (i.e. one month delayed relative to A), so B is the ordinary annuity. Each plan shows eleven $100 monthly payments in the year, so the total invested = 11 × $100 = $1,100.