alleryStart learning →What is an annuity?
AA single lump-sum payment made at the start
BAn investment funded by equal periodic payments
CA loan repaid in one final balloon payment
DA savings account with no interest paid on it
Answer & Solution
Correct answer: B. An investment funded by equal periodic payments
1. An annuity is an investment built from a sequence of payments rather than one deposit.
2. Those payments are periodic and equal in size, for example the same amount every month.
3. Because each deposit earns interest for a different length of time, the balance forms a geometric series.
4. A single lump sum makes no sequence at all, so it cannot be summed as a series.
_Source: OpenStax Algebra and Trigonometry (CC BY 4.0), Ch 13 "Sequences, Probability and Counting Theory", section 13.4 Series and Their Notations_
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