The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity for interest rates greater than zero.

Question

Quizplus · Accepted Answer

This is because in an annuity due, the first payment is made at the beginning of the period, which means it has one extra period to earn interest compared to the ordinary annuity. This extra period of interest translates to a higher future value.

The Future Value of an Annuity Due Is Always Greater