Which of the following best describes an annuity?
Equal, regular deposits are made into an account earning interest.
Deposits are made at random (whenever you have extra money) into an account earning interest.
A lump sum is deposited into an account earning simple interest.
A lump sum is deposited into an account earning compound interest.

The best description of an annuity is:

**Equal, regular deposits are made into an account earning interest.**

An annuity involves a series of equal payments made at regular intervals, often with the goal of earning interest over time, commonly associated with retirement savings, insurance payouts, or loan repayments.

Would you like more details on how annuities work or examples? Here are five related questions to explore:

1. What are the different types of annuities, such as fixed vs. variable annuities?
2. How is the future value of an annuity calculated?
3. What is the difference between an annuity due and an ordinary annuity?
4. How does compound interest impact the growth of an annuity?
5. What are some real-world applications of annuities in financial planning?

**Tip:** Understanding the time value of money is key when working with annuities. It helps determine the future or present value of the series of payments.

Which of the following best describes an annuity? Equal, regular deposits are made into an account earning interest. Deposits are made at random (whenever you have extra money) into an account earning interest. A lump sum is deposited into an account earning simple interest. A lump sum is deposited into an account earning compound interest.

Explore the concept of annuities with this detailed explanation. Learn how equal, regular deposits earning interest form the basis of an annuity. Understand key financial principles, including the time value of money and how compound interest impacts the future value of an annuity. Ideal for students in Grades 10-12.

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