To find the present value of an annuity due, one could
A) find the present value of an ordinary annuity and add one extra payment.
B) find the present value of an ordinary annuity but N=1 for the number of periods.
C) find the present value of an ordinary annuity and divide by 1+i.
D) find the present value of an ordinary annuity and multiply by 1+i.

Question

Quizplus · Accepted Answer

The present value of an annuity due can be found by calculating the present value of an ordinary annuity and then multiplying by (1+i) because payments in an annuity due are made at the beginning of each period, which means each payment is compounded for one additional period compared to an ordinary annuity.

To Find the Present Value of an Annuity Due, One