Calculating Present Values for Annuities

Ordinary annuities are used for loans, while annuities due are used for investments.

Ordinary annuities have payments at the end of each period, while annuities due have payments at the beginning of each period. (correct)

There is no key difference between ordinary annuities and annuities due.

Ordinary annuities have a different formula for calculating present value compared to annuities due.

$PV = C \times \left[\frac{i(1+i)^n - 1}{i}\right]$

$PV = C \times \left[\frac{i(1+i)^n - 1}{(1+i)}\right]$ (correct)

$PV = C \times \left[\frac{(i+1)(1+i)^n - 1}{i}\right]$

$PV = C \times \left[\frac{(1+i)^n - 1}{i}\right]$

$PV = C \times \left[\frac{(1+i)^n - 1}{i}\right]$

$PV = C \times \left[\frac{i(1+i)^n - 1}{i}\right]$

$PV = C \times \left[\frac{(i+1)(1+i)^n - 1}{(1+i)}\right]$

$PV = C \times \left[\frac{(i+1)(1+i)^n - 1}{i}\right]$ (correct)

<p>The ordinary annuity formula has an additional term of $\frac{1}{(1+i)}$, while the annuity due formula has an additional term of $\frac{(i+1)}{i}$.</p> Signup and view all the answers

<p>Annuity due</p> Signup and view all the answers

<p>All of the above</p> Signup and view all the answers