Question
amount of annuity=30,000 interest rate=8% period (years)=11 a. calculate the present value of the annuity assuming...
amount of annuity=30,000 interest rate=8% period (years)=11 a. calculate the present value of the annuity assuming that it is (1)an ordinary annuity (2) an annuity due b. compare your findings in parts a(1) and a(2). all else being identical, which type of annuity-oridinary or annuity due-yields a higher present value? explain why
Homework Answers
Answer #1
In annuity-due payments are made at the beginning of the period, which reduces interest payment. Since interest is less in annuity-due than annuity-ordinary, annuity-due yields a higher present value.
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