If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due?
A) $9,615.38
B) $10,000.00
C) $10,400.00
D) $10,700.00

Question

Quizplus · Accepted Answer

An annuity due is an annuity whose payment is due at the beginning of the period, rather than at the end. To find the future value of an annuity due, you can calculate the future value of an ordinary annuity and then multiply the result by (1 + r), where r is the interest rate. Since the future value of the ordinary annuity is $10,000 and the interest rate is 4 percent, the future value of the annuity due is $10,000 * (1 + 0.04) = $10,400.

If the Future Value of an Ordinary, 7-Year Annuity Is