The values shown in ordinary annuity tables (either present value or compound value) can be adjusted to the annuity due form by ____ the ordinary annuity interest factor by ____.
A) dividing, (1 + i)
B) dividing, (1 + i)n
C) multiplying, (1 + i)
D) multiplying, (1 + i)n

Question

Quizplus · Accepted Answer

To adjust ordinary annuity tables to annuity due form, we need to multiply the ordinary annuity interest factor by (1 + i), as annuity due payments are made at the beginning of the period and therefore earn interest immediately. Option A and B involve division, which would decrease the value of the annuity due. Option D involves multiplying by (1 + i)n, which is incorrect as it would compound the interest for an extra period, resulting in a higher value than the annuity due. Therefore, option C is the correct choice.

The Values Shown in Ordinary Annuity Tables (Either Present Value