Parker Posie wants to determine how much she must deposit today at 14% interest to provide four withdrawals of $26,000 at the end of each year, beginning five years from now. This is an example of the present value of
A) an ordinary annuity.
B) an annuity due.
C) a compound annuity due.
D) a deferred ordinary annuity.

Question

Quizplus · Accepted Answer

This scenario describes a deferred ordinary annuity because the withdrawals ($26,000) occur at the end of each year, starting five years from now. This means there is a deferral period before the annuity payments begin, which is characteristic of a deferred ordinary annuity. An ordinary annuity has payments at the end of each period, but without the initial deferral period.

Parker Posie Wants to Determine How Much She Must Deposit