Question

Which will provide the largest yield on an annuity after 30 years with 6% annual interest, compounded monthly? Annuity A: Deposit $2400 per year. Annuity B: Deposit $600 per quarter. Annuity C: Deposit $72,000 one lump sum.

Answer 1

Annuity C: Deposit $72,000 one lump sum

Explanation:

The yield is improved when the money is on deposit for a longer period.

If the $2400 annual deposit is made at the first of the year, then it will yield more than $600 deposits made at the first of each quarter.

If the $72,000 deposit is made at the beginning of the period, the entire amount is earning interest for the entire period.

Annuity C will provide the largest yield.