The Present Value of an Annuity Due Equals the Present

question 111

True/False

The present value of an annuity due equals the present value of an ordinary annuity times the discount rate.

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Definitions:

Interest Rate

The percentage of a loan that is incurred as interest by the borrower, usually represented as an annual percentage of the outstanding loan amount.

Non-Interest-Bearing

Describes a financial instrument that does not generate interest income for the holder.

Promissory Note

A pecuniary promise recorded in a document, where one side agrees to pay a definite financial sum to the other, available either on demand or on a date in the future that has been agreed upon.

Simple Interest

Interest determination based strictly on the principal sum, thereby excluding any interest that may have accrued in past periods from the calculation.