Question

Explain the difference between a regular annuity and an annuity due.

Answer 1

HI

Annuity is the regular pay scheme which goes on for a definite time period, for example 5 years, 10 years etc.

In regular annuity, first payment is made at the end of the payment period. For example there is an annuity which pays yearly coupon, so in regular annuity first payment is made after 1 year.

in annuity due first payment is made at the beginning of period i.e. at the start of annuity. For example in an annuity due, if the annuity starts from today, then first payment is also made today only.

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