Which One of the Following Statements Concerning an Ordinary Annuity

question 348

Multiple Choice

Which one of the following statements concerning an ordinary annuity is true?

• A) An ordinary annuity consists of equal payments that occur at the beginning of each period over a set period of time.
• B) If two annuities are equal in every way except that one is an ordinary annuity and one is an annuity due, then the ordinary annuity will have a larger future value than the annuity due.
• C) The future value of an ordinary annuity can be computed by dividing the future value of an annuity due by (1 + r).
• D) If two annuities are equal in every way except that one is an ordinary annuity and one is an annuity due, then the ordinary annuity will have a larger present value than the annuity
• Due)
• E) Most financial calculators can compute ordinary annuity problems but not annuity due problems.

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Definitions:

Contribution Margin

The amount of revenue from sales that exceeds variable costs, indicating the contribution of sales to fixed costs and profit.