If the present value of an ordinary, 10-year annuity is $25,000 and interest rates are 7 percent, what is the present value of the same annuity due?
A) $23,644.49
B) $24,997.51
C) $25,000.00
D) $26,750.00

Question

Quizplus · Accepted Answer

An annuity due is an annuity where the payments are made at the beginning of each period instead of the end. To find the present value of an annuity due, you can calculate the present value of an ordinary annuity and then multiply it by (1 + r), where r is the interest rate. Given that the present value of the ordinary annuity is $25,000 and the interest rate is 7% (or 0.07 as a decimal), the present value of the annuity due is $25,000 * (1 + 0.07) = $25,000 * 1.07 = $26,750.

If the Present Value of an Ordinary, 10-Year Annuity Is