Assume two annuities will each provide $500 annual cash flows for 5 years.One is an ordinary annuity and the other is an annuity due.Which statement concerning these annuities is correct?

Question

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The annuity due is more valuable than the ordinary annuity because it pays at the beginning of each period, allowing for an extra compounding period, which increases the present value of the annuity. The other statements are not true. A) The ordinary annuity pays at the end of each period. C) Both annuities pay for 5 periods. D) It is unclear which annuity will have the highest value at the end of Year 4 without additional information about the discount rate. E) The annuity due is more valuable than the ordinary annuity, so they are not equal in value given any positive discount rate.

Assume Two Annuities Will Each Provide $500 Annual Cash Flows