Annuity Due: Definition and Calculation
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Questions and Answers

At what point in each period are payments made or received in an annuity due?

  • Immediately after the start of each time interval (correct)
  • At the end of each period
  • At the midpoint of each period
  • At random intervals throughout the period

    • What is one key difference between an annuity due and an ordinary annuity?

  • The interest rate applied
  • The duration of payments
  • The frequency of payments
  • The timing of cash flows (correct)

    • Which of the following is an example of an annuity due payment?

  • Rent (correct)
  • Monthly pension payments
  • Stock dividends
  • Mortgage payments

    • How does the present value of an annuity due compare to that of an ordinary annuity, assuming the same cash flows and interest rate?

    <p>It is higher</p> Signup and view all the answers

    What is a common characteristic of payments in an annuity due?

    <p>Fixed cash flows</p> Signup and view all the answers

    Which of the following is an example of an ordinary annuity?

    <p>Mortgage payments</p> Signup and view all the answers

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