The higher the rate used in determining the future value of a $1 annuity, Select one:
the smaller the future value at the end of the period.
the greater the future value at the end of a period.
the greater the present value at the beginning of a period.
none of these – the interest has no effect on the future value of an annuity.
Answer:
The higher the rate used in determining the future value of a $1 annuity, Select one:
B. the greater the future value at the end of a period.
Explaination
Higher the rate will give higher return on face value so the greater the future value at the end of a period.we will understand this bu following exampls with 10% rate and 20% rate
| Year | $1 | Rate @ 20% | |
| 1 | 1 | 1.2 | |
| 2 | 1 | 1.44 | |
| 3 | 1 | 1.728 | |
| 4.368 | |||
| Year | $1 | Rate @ 10% | |
| 1 | 1 | 1.1 | |
| 2 | 1 | 1.21 | |
| 3 | 1 | 1.331 | |
| 3.641 |
