ANSWERS TO REVIEW QUESTIONS

An annuity due is one for which payments occur at the beginning of each period. The ordinary annuity is the more common. For otherwise identical annuities and interest rates, the annuity due results in a higher future value because cash flows occur earlier and have more time to compound. 4-9. The present value of an ordinary annuity, PVAn, can be determined using the formula: PVAn = PMT x ... ................
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