Question

What is true about Annuity Due ?

• A. It is an annuity in which payments are made at the end of each payment period.
• B. It is an annuity in which payments are made at the beginning of each payment period.
• C. It is an annuity in which payments are made in the middle of each payment period.
• D. None of the above

Answer 1

The correct option is B It is an annuity in which payments are made at the beginning of each payment period.

$\Rightarrow$ True statement about Annuity Due is,

$-Itisanannuityinwhichpaymentsaremadeatthebeginningofeachpaymentperiod.$

$\Rightarrow$ Annuity due is an annuity whose payment is to be made immediately at the beginning of each period.

$\Rightarrow$ A common example of an annuity due payment is rent, as the payment is often required upon the start of a new month as opposed to being collected after the benefit of rent has been received for an entire month.

$\Rightarrow$ All payments are in the same amount.

$\Rightarrow$ All payments are made at the same intervals of time