Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity date of Loan A will be:
A) Earlier than Loan B.
B) Later than Loan B.
C) The same as Loan B.
D) Indeterminate with respect to Loan B.

Question

Quizplus · Accepted Answer

A loan structured as an annuity due has payments due at the beginning of each period, while a loan structured as an ordinary annuity has payments due at the end of each period. Because the payments for Loan A are made earlier than the payments for Loan B, Loan A will reach maturity earlier than Loan B.

Loan a Has the Same Original Principal, Interest Rate, and Payment