An annuity due and an ordinary annuity have equal payments, the same interest rates, and the amount of time between the payments is equal.Which statement is true?
A) The present value of the annuity due is less than the present value of the ordinary annuity.
B) The future value of the annuity due is less than the future value of the ordinary annuity.
C) The future value of the annuity due is equal to the future value of the ordinary annuity.
D) The present value of the annuity due is greater than the present value of the ordinary annuity.

Question

Quizplus · Accepted Answer

The present value of an annuity due is greater than the present value of an ordinary annuity because payments for an annuity due are made at the beginning of each period, allowing more time for each payment to earn interest.

An Annuity Due and an Ordinary Annuity Have Equal Payments