Which of the following payments (receipts) would probably not be considered an annuity due? Based on your knowledge and using logic, think about the timing of the payments.
A)rent payments associated with a five-year lease
B)payments for a magazine subscription for a two-year period where the payments are made annually
C)interest payments associated with a corporate bond that was issued today
D)annual payments associated with lottery winnings that are paid out as an annuity

Question

Quizplus · Accepted Answer

An annuity due is a series of payments made at the beginning of each period. Option C mentions interest payments associated with a bond issued today, which means the payments are made at the end of each period, thus making it not an annuity due. On the other hand, options A, B, and D mention payments made at the beginning of each lease period, subscription period, and lottery winning period, respectively, which makes these payments an annuity due.

Which of the Following Payments (Receipts) Would Probably Not Be