The future value of an annuity will be larger if
1. the annuity is an ordinary annuity
2. the annuity is an annuity due
3. the payments are made at the beginning of the year
4. the payments are made at the end of the year
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

Quizplus · Accepted Answer

An annuity due, where payments are made at the beginning of each period (3), will have a larger future value than an ordinary annuity, where payments are made at the end of each period, because each payment is invested for an additional period.

The Future Value of an Annuity Will Be Larger If