In Comparing an Ordinary Annuity and an Annuity Due, Which

question 120

Multiple Choice

In comparing an ordinary annuity and an annuity due, which of the following is true?

• A) The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity.
• B) The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due.
• C) The future value of an annuity due is always less than the future value of an otherwise identical ordinary annuity, since one less payment is received with an annuity due.
• D) All things being equal, one would prefer to receive an ordinary annuity compared to an annuity due.

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Definitions:

Bakes

Refers to the process of cooking food by dry heat, typically in an oven.

Variable Costs

Costs that vary in proportion to the volume of goods or services produced.

Capital

Resources or assets used for the production of goods and services, often including tools, machinery, and buildings.

Mixers

Devices used for blending ingredients together, commonly found in cooking, baking, and cocktail making.