Practice prompt · Q:time-value-of-money-and-financial-mathematics/annuity-form-and-rate-basis-001

Identify the annuity form and the periodic rate

Tests whether the learner reads payment timing off a timeline and puts the rate and the periods on the same basis.

Updated Sep 10, 2026 Review due Nov 18, 2026

Practice

Check your answer

Choose a response, then check the answer and explanation.

A lease requires 12 quarterly payments of 8,000, the first due immediately on signing. The stated annual rate is 8 percent compounded quarterly.

Two decisions come before any factor is looked up: which end of the period the payments fall on, and what one period is. Getting either wrong produces an answer that is close enough to look right.

Choose the best answer. a An annuity due, discounted at 2 percent for 12 periods. b An ordinary annuity, discounted at 2 percent for 12 periods. c An annuity due, discounted at 8 percent for 12 periods. d An annuity due, discounted at 2 percent for 3 periods.

Your answer stays on this page. It is not sent or saved.

Show explanationHide explanation

Answer: a

Choice a. Payment at signing makes it an annuity due, and the periodic rate is 2 percent over 12 quarters.