If the future value of an ordinary, 11-year annuity is $5,575 and interest rates are 5.5 percent, what is the future value of the same annuity due?
A) $5,619.52
B) $5,769.06
C) $5,881.63
D) $5,947.88

Question

Quizplus · Accepted Answer

The future value of an annuity due is higher than that of an ordinary annuity because each payment is made at the beginning of the period, allowing each payment to earn interest for an additional period. To find the future value of an annuity due, multiply the future value of the ordinary annuity by (1 + interest rate). Here, $5,575 * (1 + 0.055) = $5,881.63.

If the Future Value of an Ordinary, 11-Year Annuity Is