The present value of an annuity due, as compared to the present value of an ordinary annuity of the same length and interest rate, will
A)sometimes be greater and sometimes be smaller.
B)always be the same.
C)always be smaller.
D)always be greater.

Question

Quizplus · Accepted Answer

The present value of an annuity due is always greater than the present value of an ordinary annuity of the same length and interest rate because payments for an annuity due are made at the beginning of each period, allowing each payment to accrue interest for one additional period compared to an ordinary annuity, where payments are made at the end of each period.

The Present Value of an Annuity Due, as Compared to the Present