Decide whether the problem relates to an ordinary annuity or an annuity due. A retiree inherits $100,000 and invests it at an annual rate of 7.7%, compounded monthly, in an annuity that provides an amount at the end of each month for the next 11 years. Find the monthly amount.
A)Ordinary annuity
B)Annuity due

Question

Decide whether the problem relates to an ordinary annuity or an annuity due. A retiree inherits $100,000 and invests it at an annual rate of 7.7%, compounded monthly, in an annuity that provides an amount at the end of each month for the next 11 years. Find the monthly amount. ​
A)Ordinary annuity
B)Annuity due

Quizplus · Accepted Answer

The problem describes an ordinary annuity because the payments are received at the end of each period (month in this case), which is characteristic of ordinary annuities.

Decide Whether the Problem Relates to an Ordinary Annuity or an Annuity