Study the time line and accompanying 5-period cash-flow pattern:
The present value of the 5-period annuity shown above as of Point A is the present value of a 5-period , whereas the future value of the same annuity as of Point B is the future value of a 5-period .

ordinary annuity; ordinary annuity.

No worries! We‘ve got your back. Try BYJU‘S free classes today!

ordinary annuity; annuity due.

No worries! We‘ve got your back. Try BYJU‘S free classes today!

annuity due; annuity due.

No worries! We‘ve got your back. Try BYJU‘S free classes today!

annuity due; ordinary annuity.

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

Open in App

Solution

The correct option is D annuity due; ordinary annuity.
An annuity due is a repeating payment that is made at the beginning of each period. It has the following characteristics: All payments are in the same amount (such as a series of payments of $500) . A l l p a y m e n t s a r e m a d e a t t h e s a m e i n t e r v a l s o f t i m e (s u c h a s o n c e a q u a r t e r o r y e a r) . p o i n t A i s t h e p r e s e n t v a l u e o f a 5 - p e r i o d a n n u i t y d u e . A n o r d i n a r y a n n u i t y i s a s e r i e s o f e q u a l p a y m e n t s m a d e a t t h e e n d o f c o n s e c u t i v e p e r i o d s o v e r a f i x e d l e n g t h o f t i m e . W h i l e t h e p a y m e n t s i n a n a n n u i t y c a n b e m a d e a s f r e q u e n t l y a s e v e r y w e e k, i n p r a c t i c e, o r d i n a r y a n n u i t y p a y m e n t s a r e m a d e m o n t h l y, q u a r t e r l y, s e m i - a n n u a l l y o r a n n u a l l y W h e r e a s t h e f u t u r e v a l u e o f t h e s a m e a n n u i t y a s p o i n t B i s t h e f u t u r e v a l u e o f a$ 5$ period is ordinary annuity.

Suggest Corrections

Similar questions

A $5 -$ year ordinary annuity has a present value of $$ 1, 000$ . If the interest rate is $8$ percent, the amount of each annuity payment is closest to which of the following?

250.44$
231.91$
181.62$
170.44$
184.08$

Q. An 8-year annuity due has a present value of

1,000

. I f t h e i n t e r e s t r a t e i s

5$ percent, the amount of each annuity payment is closest to which of the following?

Q. Find the present value of an ordinary annuity of

8

quarterly payments of Rs.

500

each, the rate of interest being

8 %

p.a. compounded quarterly.

Q. Annuity payable for a fixed number of intervals is called.

Q. Under Annuity method Asset A/c is debited by ________________.

Join BYJU'S Learning Program

Study the time line and accompanying 5-period cash-flow pattern:The present value of the 5-period annuity shown above as of Point A is the present value of a 5-period ______________ , whereas the future value of the same annuity as of Point B is the future value of a 5-period ______________ .

Study the time line and accompanying 5-period cash-flow pattern:
The present value of the 5-period annuity shown above as of Point A is the present value of a 5-period , whereas the future value of the same annuity as of Point B is the future value of a 5-period .