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true or false: to calculate the interest earned from an annuity, you subtract the sum of...

true or false:

to calculate the interest earned from an annuity, you subtract the sum of all the payments from the future value of the annuity?

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Answer #1

Value of annuity in a future time always higher than the series of payments assuming a specific interest rate. The difference is due to the time value of money or earning capacity at a discount rate higher than zero.

So, future value of annuity is the sum of total periodic payments and compounding interest incurred from the payments. It includes all the principal payments along with total interest earned. In order to compute total interest generated from the annuity investment we can subtract total annuity payments from the future value of annuity.

Hence the statement is “true”

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