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Finance Annuity Due Quiz

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Questions and Answers

What is an annuity due?

A payment made irregularly

A payment made at the end of each period

A payment made at the beginning of each period (correct)

A single lump sum payment

An annuity due is less valuable than an ordinary annuity if the interest rate is positive.

False

What formula is used to calculate the present value of an annuity due?

PV = PMT × [(1 - (1 + r)^-n) / r] × (1 + r)

The future value of an annuity due can be calculated using the formula: FV = PMT × [((1 + r)^n - 1) / r] × (1 + r). In this case, PMT stands for the ______ .

<p>payment amount</p> Signup and view all the answers

Match the following terms related to annuity due with their correct descriptions:

<p>Present Value = Value today of a series of future payments Future Value = Value of an investment at a specific date in the future Payment = Regular cash flow in an annuity Interest Rate = Rate at which future cash flows are discounted</p> Signup and view all the answers