If the future value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the future value of the same annuity due?
A) $943.40
B) $1,000.00
C) $1,040.00
D) $1,060.00

Question

Quizplus · Accepted Answer

An annuity due generates higher future value than an ordinary annuity because each payment is invested for an additional period. To find the future value of an annuity due, you can multiply the future value of the ordinary annuity by (1 + interest rate). Therefore, $1,000 * 1.06 = $1,060.

If the Future Value of an Ordinary, 4-Year Annuity Is