QuestionWhich option describes an annuity? A. $\$ 1,000$ lump sum B. $\$ 5,000$ in a one-year $C D$ C. $\$ 500$ savings D. $\$ 100$ regular deposits

Studdy Solution
Now, let's examine each option and see which one fits the definition of an annuity.
A. Investing a \$1,000 lump sum into an investment account. This is a one-time payment, not a series of equal payments made at regular intervals.
B. Depositing \$5,000 into a one-year CD. This is also a one-time payment, not a series of equal payments made at regular intervals.
C. Using \$500 to open a savings account. This is also a one-time payment, not a series of equal payments made at regular intervals.
. Making regular deposits of \$100 into a sinking fund. This involves making a series of equal payments (\$100) at regular intervals, which fits the definition of an annuity.
The correct answer is D. Making regular deposits of \$100 into a sinking fund involves an annuity.