Which of the following properly describes the present value of an annuity due?
A)The first payment is one period after the present value.
B)The last payment is one period after the future value.
C)The first payment is on the same date as the present value.
D)The last payment is on the same date as the future value.

Question

Quizplus · Accepted Answer

An annuity due is a series of equal payments made at the beginning of each period. The present value of an annuity due is calculated as of the same date as the first payment, which means that the first payment is on the same date as the present value. Option A is incorrect as it describes the present value of an ordinary annuity, where the first payment is made at the end of the first period. Option B is incorrect as it describes the future value of an annuity due, where the last payment is made at the end of the last period. Option D is also incorrect as it describes the future value of an ordinary annuity, where the last payment is made at the end of the last period.

Which of the Following Properly Describes the Present Value of an Annuity