An annuity and an annuity due with the same number of payments have the same future value if r = 10%. Which one has the higher payment?
A)They both must have the same payment since the future values are the same.
B)There is no way to tell which has the higher payment.
C)An annuity and an annuity due cannot have the same future value.
D)The annuity has the higher payment.
E)The annuity due has the higher payment.

Question

Quizplus · Accepted Answer

An annuity due has payments at the beginning of each period, so it accumulates more interest over time compared to an ordinary annuity with the same payment amount. Therefore, to have the same future value, the annuity must have a higher payment.

An Annuity and an Annuity Due with the Same Number