The present value of an annuity stream of $100 per year is $614 when valued at a 10 percent rate.By approximately how much would the value change if these were annuities due?
A)An increase of $10
B)An increase of $61
C)An increase of $100
D)Unknown without knowing number of payments.

Question

Quizplus · Accepted Answer

The value of an annuity due is equal to the value of an ordinary annuity plus one payment. Therefore, the value of the annuity due would be $675 ($614 + $61). So the value would increase by $61.

The Present Value of an Annuity Stream of $100 Per